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3.16 Analysis of Financial Statements—CBSE XII
Therefore, we have to calculate Gross Profit Ratio to check the efficiency of the manager.
Gross Profit
Gross Profit Ratio for the year ended 31st March, 2023 = 100
Net Sales
` 2,25,000
= 100 = 25%.
` 9,00,000
` 3,60,000
Gross Profit Ratio for the year ended 31st March, 2024 = 100 = 20%.
` 18,00,000
Gross Profit Ratio has decreased from 25% to 20%, which shows that margin of profit has
decreased in the year ended 31st March, 2024 and Vijay is wrong in his decision.
To test the short-term financial position of the company, we have to calculate Current Ratio.
Current Assets ` 3,00,000
Current Ratio for the year ended 31st March, 2023 = = 2 :1 .
Current Liabilities ` 1,50,000
` 4,50,000
Current Ratio for the year ended 31st March, 2024 = = 9 : 5 or 1.80 : 1.
` 2,50,000
Since, Current Ratio has decreased from 2 in 2023 to 1.8 in 2024, financial position of the
company has become weak. So Vijay is again incorrect in his decision that short-term
financial position of the company is becoming strong.
Illustration 11.
From the following information, calculate Operating Ratio:
STATEMENT OF PROFIT & LOSS for the year ended 31st March, 2024
Particulars Note No. `
I. Revenue from Operations 50,00,000
II. Other Income 1,00,000
III. Total Revenue 51,00,000
IV. Expenses:
Purchases of Stock-in-Trade 27,00,000
Change in Inventories of Stock-in-Trade (2,00,000)
Employee Benefit Expenses 3,10,000
Depreciation 90,000
Finance Cost 1,00,000
Other Expenses 1 2,50,000
Total Expenses 32,50,000
V. Profit before Tax (III – IV) 18,50,000
Note to Accounts
Particulars `
1. Other Expenses
Office Expenses 1,20,000
Selling and Distribution Expenses 80,000
Loss on Sale of Fixed Assets 50,000
2,50,000