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Accounting Ratios 3.11
Illustration 6.
Following is the Statement of Profit & Loss of Hindustan Products Limited for the year
ended 31st March, 2024 and the Balance Sheet of the company as at that date:
STATEMENT OF PROFIT & LOSS for the year ended 31st March, 2024
Particulars Note No. `
I. Revenue from Operations 8,00,000
II. Expenses:
Purchases of Stock-in-Trade 5,45,000
Change in Inventories of Stock-in-Trade 1 (1,00,000)
Other Expenses 2,95,000
Total Expenses 7,40,000
III. Profit for the Period (I – II) 60,000
Note: Other expenses include direct expenses of ` 15,000.
BALANCE SHEET as at 31st March, 2024
Particulars Note No. `
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital 2,90,000
(b) Reserves and Surplus 60,000
2. Current Liabilities
(a) Trade Payables (Creditors) 1,15,000
(b) Other Current Liabilities (Outstanding Expenses) 15,000
Total 4,80,000
II. ASSETS
1. Non-Current Assets
Property, Plant and Equipment and Intangible Assets:
— Property, Plant and Equipment 2,30,000
2. Current Assets
(a) Inventories (Stock) 1,99,000
(b) Trade Receivables (Debtors) 21,000
(c) Cash and Cash Equivalents 30,000
Total 4,80,000
Note to Accounts
Particulars `
1. Change in Inventories of Stock-in-Trade
Opening Inventory 99,000
Less: Closing Inventory 1,99,000
(1,00,000)
Calculate the following ratios:
(i) Quick Ratio and (ii) Inventory Turnover Ratio.
Solution:
Quick Assets
(i) Quick Ratio =
Current Liabilities
Cash and Cash Equivalents Trade Receivables (Debtors)
=
Trade Payables Outstanding Expenses
` 30,000 21,000 ` 51,000
`
= = = 0.39 : 1 .
`
` 1,15,000 15,000 ` 1,30,000