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Model Test Papers M.251

Or
(a) Limitations of Ratio Analysis
(i) Ratio Analysis ignores qualitative factors.
(ii) Ratio Analysis ignores price-level changes.
(b) Let Cost = ` 100; Gross Profit = ` 25
Revenue from Operations = ` 100 + ` 25 = ` 125
If Revenue from Operations = ` 125, Cost = ` 100
If Revenue from Operations = ` 4,00,000, Cost = ` 4,00,000 × ` 100/` 125 = ` 3,20,000
Gross Profit = ` 3,20,000 × 1/4 = ` 80,000
Gross Profit
Gross Profit Ratio = × 100
Revenue from Operations
` 80,000
= × 100 = 20%.
` 4,00,000
23. Grow More Ltd.
CASH FLOW STATEMENT for the year ended 31st March, 2018
Particulars ` `
I. Cash Flow from Operating Activities
Surplus, i.e., Balance in Statement of Profit and Loss (Closing) 10,00,000
Less: Surplus, i.e., Balance in Statement of Profit and Loss (Opening) 6,00,000
Profit during the year 4,00,000
Add: Interim Dividend 6,00,000
Provision for Tax 1,40,000
Net Profit before Tax and Extraordinary Items 11,40,000
Add: Non-Operating and Non-cash Items:
Depreciation (WN 2) 1,30,000
Loss on Sale of Machinery (WN 1) 1,000
Interest on Debentures (` 6,00,000 × 10/100) 60,000 1,91,000
Operating Profit before Working Capital Changes 13,31,000
Less: Increase in Current Assets and Decrease in Current Liabilities:
Trade Payables 1,00,000
Inventories 1,80,000 2,80,000
Cash Generated from Operations 10,51,000
Less: Tax Paid 1,20,000
Cash Flow from Operating Activities 9,31,000
II. Cash Flow from Investing Activities
Purchase of Machinery (9,40,000)
Proceeds from Sale of Machinery 9,000
Purchase of Goodwill (4,00,000)
Cash Used in Investing Activities (13,31,000)
III. Cash Flow from Financing Activities
Proceeds from Issue of Shares including Premium 10,20,000
Proceeds from Issue of 10% Debentures (` 2,00,000 – ` 20,000: Discount) 1,80,000
Payment of Interim Dividend (6,00,000)
Payment of Interest on Debentures (60,000)
Cash Flow from Financing Activities 5,40,000
IV. Net Increase in Cash and Cash Equivalents (I + II + III) 1,40,000
Add: Cash and Cash Equivalents in the beginning of the period 2,40,000
V. Cash and Cash Equivalents at the end of the period 3,80,000