This document provides definitions and formulas for various financial ratios used to analyze the liquidity, solvency, activity, and profitability of a business. It defines ratios such as the current ratio, quick ratio, debt-equity ratio, stock turnover ratio, gross profit ratio, and return on investment. Formulas are given for each ratio alongside notes on how to calculate the variables. The ratios are used to evaluate a business's short-term and long-term financial health and operational efficiency.

1. Ratio Analysis
1 | Prepared By: Anuj Bhatia [BBA (Gold Medalist), M.Com (Gold Medalist), CA(Inter.), CMA(INTER), G-SLET, UGC NET-JRF, Ph.D (Pur.)]
Contact: (M) 9898251471 E-mail: anujbhatia09@gmail.com
Name of the Ratio Formula
1. LIQUIDITY RATIOS Liquidity ratios measure the short-term solvency which means the
ability of the enterprise to meet its short-term obligation as and
when they become due.
(a) Current ratio 𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑨𝒔𝒔𝒆𝒕𝒔
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
= ………….. : …………..
C.A= Debtors- Provision on Debtors+ B/R+ Marketable securities+ Cash+ Accrued
Incomes+ Stock + Prepaid Expenses
C.L.= Trade Creditors+ B/P+ O/s Exp+ Bank O/D+ Provision for Tax
Current ratio establishes a relationship between CA and CL.
(b) Quick Ratio
(or Acid Test Ratio)
(or Liquid Ratio)
𝑸𝒖𝒊𝒄𝒌 𝑨𝒔𝒔𝒆𝒕𝒔
𝑪𝒖𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
= ………….. : …………..
Notes:
1. Quick Assets= Current Assets-Stock-Prepaid Expenses
2. Working Capital= Current Assets- Current Liabilities
Quick ratio establish a relationship between quick assets and CL.
(c) Super Quick Ratio or
absolute Cash ratio
𝑪𝒂𝒔𝒉+𝑩𝒂𝒏𝒌+𝑴𝒂𝒓𝒌𝒆𝒕𝒂𝒃𝒍𝒆 𝑺𝒆𝒄𝒖𝒓𝒊𝒕𝒊𝒆𝒔
𝑪𝒖𝒓𝒆𝒏𝒕 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
= ………….. : …………..
2. Solvency ratios Solvency ratio measure the long-term financial solvency which
means the enterprise’s ability to pay the interest regularly and
to repay the principal on maturity or in pre-determined
installments at due dates.
(a) Debt-equity ratio 𝑳𝒐𝒏𝒈 𝑻𝒆𝒓𝒎 𝑫𝒆𝒃𝒕
𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓𝒔 𝑭𝒖𝒏𝒅𝒔
= ………….. : …………..
Note: Shareholder’s Funds can be calculated as follows:
1. Equity Share Capital+ Preference Share Capital+ Reserves and Surplus-
Fictitious Assets
2. Equity Share holder’s Funds+ Preference Share Capital
3. Capital Employed- Long Term Debt
4. Net Fixed Assets+ Investment+ Working Capital- Long Term Debt
5. Net Fixed Assets+ Investment+ Current Assets- Current Liabilities- Long
Term Debt
6. Total Assets- Total Debt
Debt-equity ratio establishes a relationship between Long term debt and Share
holders’ fund.
(b) Total Assets Debt
Ratio
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
𝑳𝒐𝒏𝒈 𝑻𝒆𝒓𝒎 𝑫𝒆𝒃𝒕
= ………….. : …………..
Total assets to debt ratio establish a relationship between Total assets and total
long term debt.
(c) Proprietary Ratio 𝑷𝒓𝒐𝒑𝒓𝒊𝒆𝒕𝒐𝒓′ 𝑺 𝑭𝒖𝒏𝒅𝒔
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
x 100 = …%
Note: Proprietor’s Funds = Shareholder’s Funds

2. Ratio Analysis
2 | Prepared By: Anuj Bhatia [BBA (Gold Medalist), M.Com (Gold Medalist), CA(Inter.), CMA(INTER), G-SLET, UGC NET-JRF, Ph.D (Pur.)]
Contact: (M) 9898251471 E-mail: anujbhatia09@gmail.com
Proprietary ratio measures a relationship between proprietors’ fund and the total
assets.
(d) Interest Coverage
Ratio
𝐍𝐞𝐭 𝐏𝐫𝐨𝐟𝐭 𝐁𝐞𝐟𝐨𝐫𝐞 𝐈𝐧𝐭𝐞𝐫𝐞𝐬𝐭 𝐀𝐧𝐝 𝐓𝐚𝐱𝐞𝐬
𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒐𝒏 𝑳𝒐𝒏𝒈 𝑻𝒆𝒓𝒎 𝑫𝒆𝒃𝒕
= … Times
Interest coverage ratio establishes a relationship between PBIT and interest on
long term debt.
(e) Capital Gearing
Ratio
𝑭𝒖𝒏𝒅𝒔 𝒃𝒆𝒂𝒓𝒊𝒏𝒈 𝑭𝒊𝒙𝒆𝒅 𝑭𝒊𝒏𝒂𝒏𝒄𝒊𝒂𝒍 𝑷𝒂𝒚𝒎𝒆𝒏𝒕𝒔
𝑬𝒒𝒖𝒊𝒕𝒚 𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓𝒔 𝑭𝒖𝒏𝒅𝒔
3. Activity Ratios Activity ratios measure the effectiveness with which a firm
uses its available resources. These ratio help in commenting
on the efficiency of the enterprise in managing its assets.
(a) Stock Turnover
Ratio
𝑪𝒐𝒔𝒕 𝒐𝒇 𝑮𝒐𝒐𝒅𝒔 𝑺𝒐𝒍𝒅
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑺𝒕𝒐𝒄𝒌
=…. Times
Notes:
1. Average Stock =
𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝑺𝒕𝒐𝒄𝒌+𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑺𝒕𝒐𝒄𝒌
𝟐
2. Cost Of Goods Sold = Net sales- Gross Profit OR
COGS= Opening Stock+ Purchases+ Direct Expenses- Closing Stock
Stock turnover ratio establish a relationship between cost of goods sold and
average stock.
(b) Debtors Turnover
Ratio
𝑵𝒆𝒕 𝑪𝒓𝒆𝒅𝒊𝒕 𝑺𝒂𝒍𝒆𝒔
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑫𝒆𝒃𝒕𝒐𝒓𝒔
= …Times
Notes:
1. Average Debtors =
𝑂𝑝.𝐷𝑟𝑠.+𝑂𝑝.𝐵/𝑅+ 𝐶𝑙.𝐷𝑟𝑠.+𝐶𝑙.𝐵/𝑅
2
2. Net Credit Sales = Gross Credit Sales- Sales Return
Or, = Net Sales- Cash Sales
(c) Average Debt
Collection Period
=
𝟏𝟐 𝒎𝒐𝒏𝒕𝒉𝒔 𝒐𝒓 𝟓𝟐 𝒘𝒆𝒆𝒌𝒔 𝒐𝒓 𝟑𝟔𝟓 𝒅𝒂𝒚𝒔
𝑫𝒆𝒃𝒕𝒐𝒓𝒔 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒓𝒂𝒕𝒊𝒐
= … Period
=
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑫𝒆𝒃𝒕𝒐𝒓𝒔
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑴𝒐𝒏𝒕𝒉𝒍𝒚 / 𝑾𝒆𝒆𝒌𝒍𝒚/ 𝑫𝒂𝒊𝒍𝒚 𝑺𝒂𝒍𝒆𝒔
Note:
Average Sales =
𝑵𝒆𝒕 𝑪𝒓𝒆𝒅𝒊𝒕 𝑺𝒂𝒍𝒆𝒔
𝟏𝟐 𝒎𝒐𝒏𝒕𝒉𝒔/𝟓𝟐 𝒘𝒆𝒆𝒌𝒔/𝟑𝟔𝟓 𝒅𝒂𝒚𝒔
(d) Creditor’s Turnover
Ratio
𝑵𝒆𝒕 𝑪𝒓𝒆𝒅𝒊𝒕 𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑪𝒓𝒆𝒅𝒊𝒕𝒐𝒓𝒔
=…Times
Notes:
1. Average Creditors =
𝑶𝒑.𝑪𝒓𝒔.+𝑶𝒑.𝑩/𝑷+ 𝑪𝒍.𝑪𝒓𝒔.+𝑪𝒍.𝑩/𝑷
𝟐
2. Net Credit Purchases = Gross Credit Purchases- Purchase Returns,
= Net Purchases- Cash Purchases
(e) Average Debt
Payment Period
𝟏𝟐 𝒎𝒐𝒏𝒕𝒉𝒔/𝟓𝟐 𝒘𝒆𝒆𝒌𝒔/𝟑𝟔𝟓 𝒅𝒂𝒚𝒔
𝑪𝒓𝒆𝒅𝒊𝒕𝒐𝒓𝒔 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝒓𝒂𝒕𝒊𝒐
=…Period

3. Ratio Analysis
3 | Prepared By: Anuj Bhatia [BBA (Gold Medalist), M.Com (Gold Medalist), CA(Inter.), CMA(INTER), G-SLET, UGC NET-JRF, Ph.D (Pur.)]
Contact: (M) 9898251471 E-mail: anujbhatia09@gmail.com
Or=
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑪𝒓𝒆𝒅𝒊𝒕𝒐𝒓𝒔
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑴𝒐𝒏𝒕𝒉𝒍𝒚 / 𝑾𝒆𝒆𝒌𝒍𝒚/ 𝑫𝒂𝒊𝒍𝒚 𝑺𝒂𝒍𝒆𝒔
= …Period
Note:
Average Purchases =
𝑵𝒆𝒕 𝑪𝒓𝒆𝒅𝒊𝒕 𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆𝒔
𝟏𝟐 𝒎𝒐𝒏𝒕𝒉𝒔/𝟓𝟐 𝒘𝒆𝒆𝒌𝒔/𝟑𝟔𝟓 𝒅𝒂𝒚𝒔
(f) Working Capital
Turnover Ratio
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔
𝑵𝒆𝒕 𝑾𝒐𝒓𝒌𝒊𝒏𝒈 𝑪𝒂𝒑𝒊𝒕𝒂𝒍
=…Times
Note:
Working Capital= Current Assets- Current Liabilities
4. Profitability Ratios Profitability Ratios measures managements overall
effectiveness as shown by the returns generated on sales and
investments.
(I) In Relation to Sales
(a) Gross Profit Ratio 𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔
X 100=…%
Note:
Gross Profit= Net Sales- Cost of Goods Sold
(b) Operating Ratio 𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑪𝒐𝒔𝒕
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔
X 100=…%
Note:
Operating Cost= Cost of Goods Sold+ Operating Expenses
(c) Operating Profit
Ratio
𝑶𝒑𝒆𝒓𝒂𝒕𝒊𝒏𝒈 𝑷𝒓𝒐𝒇𝒊𝒕
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔
X 100=…%
Note:
Operating Profit= Net Sales- Operating Costs
(d) Net Profit Ratio 𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕
𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔
x 100=…%
Notes:
1. Net Profit= Net Sales- Cost Of Goods Sold- Operating Expenses- Non
Operating Expenses+ Non Operating Incomes
2. Net Profit= Gross Profit- Operating Expenses- Non Operating Expenses+
Non Operating Incomes
3. Net Profit= Operating Profit- Non Operating Expenses+ Non Operating
Incomes
II. In Relation To Investment
Return On Investment
(ROI)
OR Return On Capital
Employed
𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝑩𝒆𝒇𝒐𝒓𝒆 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒂𝒏𝒅 𝑻𝒂𝒙
𝑪𝒂𝒑𝒊𝒕𝒂𝒍 𝑬𝒎𝒑𝒍𝒐𝒚𝒆𝒅
X 100=…%
Notes:
1. Capital Employed= Shareholder’s Funds+ Long term debts
OR = Net Fixed Assets+ Long Term Investment+ Net Working Capital
2. Non-Operating Assets do not form the part of Capital Employed
3. Income from Non Operating Assets should excluded be from the
Net Profit Before Interest and Tax

4. Ratio Analysis
4 | Prepared By: Anuj Bhatia [BBA (Gold Medalist), M.Com (Gold Medalist), CA(Inter.), CMA(INTER), G-SLET, UGC NET-JRF, Ph.D (Pur.)]
Contact: (M) 9898251471 E-mail: anujbhatia09@gmail.com
Return on Total Assets 𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝑩𝒆𝒇𝒐𝒓𝒆 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒂𝒏𝒅 𝑻𝒂𝒙
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔
X 100=…%
Return on Shareholders
Funds
𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝑨𝒇𝒕𝒆𝒓 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒂𝒏𝒅 𝑻𝒂𝒙
𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓𝒔 𝑭𝒖𝒏𝒅𝒔
X 100=…%
Return on Equity
Shareholders Funds
𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝑨𝒇𝒕𝒆𝒓 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒂𝒏𝒅 𝑻𝒂𝒙 𝒂𝒏𝒅 𝑷𝒓𝒆𝒇𝒆𝒓𝒆𝒏𝒄𝒆 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅
𝑬𝒒𝒖𝒊𝒕𝒚 𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓𝒔 𝑭𝒖𝒏𝒅𝒔
X 100=…%
Earning Per Share (EPS) 𝑵𝒆𝒕 𝑷𝒓𝒐𝒇𝒊𝒕 𝑨𝒇𝒕𝒆𝒓 𝑰𝒏𝒕𝒆𝒓𝒆𝒔𝒕 𝒂𝒏𝒅 𝑻𝒂𝒙 𝒂𝒏𝒅 𝑷𝒓𝒆𝒇𝒆𝒓𝒆𝒏𝒄𝒆 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅
𝑵𝒖𝒎𝒃𝒆𝒓 𝒐𝒇 𝑬𝒒𝒖𝒊𝒕𝒚 𝑺𝒉𝒂𝒓𝒆𝒔
Dividend Payout Ratio 𝑫𝑷𝑺
𝑬𝑷𝑺
x 100
Earnings Yield 𝑬𝑷𝑺
𝑴𝑷 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆
𝒙 𝟏𝟎𝟎
Market Value to Book
Value
𝑴𝒂𝒓𝒌𝒆𝒕 𝑽𝒂𝒍𝒖𝒆 𝑷𝒆𝒓 𝑺𝒉𝒂𝒓𝒆
𝑩𝒐𝒐𝒌 𝑽𝒂𝒍𝒖𝒆 𝑷𝒆𝒓 𝑺𝒉𝒂𝒓𝒆
𝒙 𝟏𝟎𝟎
OR
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒐𝒓 𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑴𝑷 𝒑𝒆𝒓 𝒔𝒉𝒂𝒓𝒆
𝑵𝒆𝒕 𝑾𝒐𝒓𝒕𝒉
𝑵𝒐 𝒐𝒇 𝑬𝒒𝒖𝒊𝒕𝒚 𝑺𝒉𝒂𝒓𝒆𝒔
𝒙 𝟏𝟎𝟎

5. Ratio Analysis
5 | Prepared By: Anuj Bhatia [BBA (Gold Medalist), M.Com (Gold Medalist), CA(Inter.), CMA(INTER), G-SLET, UGC NET-JRF, Ph.D (Pur.)]
Contact: (M) 9898251471 E-mail: anujbhatia09@gmail.com
Examples
1. The following is the BalanceSheet of Maheshwari Ltd. for the year ended 31st March 2014:
Liabilities Amount Assets Amount
Equity Share Capital 10,00,000 Goodwill 1,00,000
9% Preference Share Capital 5,00,000 Land & Building 6,50,000
8% Debentures 2,00,000 Plant 8,00,000
Long Term Loans 1,00,000 Furniture and Fixtures 1,50,000
Bills Payable 60,000 Bills Receivables 70,000
Sundry Creditors 70,000 Sundry Debtors 90,000
Bank O/D 30,000 Bank 45,000
Outstanding Expenses 5,000 Marketable Securities 25,000
Prepaid Expenses 5,000
Stock 30,000
19,65,000 19,65,000
Calculate: (1) Liquidity Ratio’s & (2) Solvency Ratio’s.
2. The following are the summarized Profit and Loss Account of Rajasthan Products Limited for
the year ending 31st March 2014 and Balance Sheet as on that date:
Profit and Loss Account
Particulars Amount Particulars Amount
To Opening Stock 99,500 By Sales 8,50,000
To Purchases 5,45,250 By Closing Stock 1,49,000
To Carriage Inward 14,250
To Gross Profit 3,40,000
9,99,000 9,99,000
To Operating Expenses: By Gross Profit 3,40,000
Selling & Distribution 30,000 By Interest Income 3,000
Administration 1,50,000 1,80,000 By Profit on Sale of Shares 9,000
To Finance Expenses 15,000
To Loss on Sale of assets 4,000
To Net Profit 1,50,000
3,49,000 3,49,000
Balance Sheet
Liabilities Amount Assets Amount
2,000 Equity shares of Rs. 100 2,00,000 Land and Building 1,50,000
Reserves 90,000 Plant and Machinery 80,000
Current Liabilities 1,30,000 Stock 1,49,000
Profit and Loss 60,000 Sundry Debtors 71,000
Cash and Bank 30,000
4,80,000 4,80,000
Compute all possible ratio’s.

6. Ratio Analysis
6 | Prepared By: Anuj Bhatia [BBA (Gold Medalist), M.Com (Gold Medalist), CA(Inter.), CMA(INTER), G-SLET, UGC NET-JRF, Ph.D (Pur.)]
Contact: (M) 9898251471 E-mail: anujbhatia09@gmail.com
3. The following are the summarized Profit and Loss Account of Gujarat Products Limited for the
year ending 31st March 2014 and Balance Sheet as on that date:
Profit and Loss Account
Particulars Amount Particulars Amount
To Opening Stock 5,00,000 By Sales
To Purchases 11,00,000 Cash 3,00,000
To Wages 3,00,000 Credit 17,00,000 20,00,000
To Factory Overhead 2,00,000 By Closing Stock 6,00,000
To Gross Profit 5,00,000
26,00,000 26,00,000
To Administrative Expenses 75,000 By Gross Profit 5,00,000
To Selling & Distribution Exp. 50,000 By Dividend on Investments 10,000
To Interest on Debentures 20,000 By Profit on sale of furniture 20,000
To Dep. On office Furniture 60,000
To Loss on Sale of Car 5,000
To Net Profit 3,20,000
5,30,000 5,30,000
To Pref. Dividend 15,000 By Bal b/d 2,71,000
To Prov. For tax 1,76,000 By Net Profit 3,20,000
To Balance c/d 4,00,000
5,91,000 5,91,000
Balance Sheet
Liabilities Amount Assets Amount
Equity shares of Rs. 100 each 10,00,000 Goodwill 5,00,000
6% Preference share capital 5,00,000 Plant and Machinery 7,50,000
General Reserve 1,00,000 Land and Building 6,00,000
Profit and Loss 4,00,000 Furniture 1,00,000
12% Debentures 1,00,000 Investments 50,000
Provision for Tax 1,76,000 Stock 6,00,000
Bills Payable 1,24,000 Bills Receivable 30,000
Band O/D 1,20,000 Debtors 1,50,000
Creditors 4,80,000 Bank 2,20,000
30,00,000 30,00,000
Compute all possible ratio’s.
4. Following is the Balance PK Limited on 31-03-2008
Liabilities Rs. Assets Rs.
Equity Share Capital 3,00,000 Fixed Assets 3,64,000
10% Pref. share Capital 1,00,000 Trade Investments 1,45,000
Reserves & Surplus 2,06,000 Stock 1,50,000
8% Secured Debentures 2,00,000 Sunday Debtors 1,65,000
Sunday Creditors 90,000 Bills Receivables 75,000
Bill Payable 30,000 Prepaid Expenses 25,000
Provision for taxation 50,000 Cash & Bank 70,000
Provident Fund 24,000 Underwriting commission 6,000
10,00,000 10,00,000

7. Ratio Analysis
7 | Prepared By: Anuj Bhatia [BBA (Gold Medalist), M.Com (Gold Medalist), CA(Inter.), CMA(INTER), G-SLET, UGC NET-JRF, Ph.D (Pur.)]
Contact: (M) 9898251471 E-mail: anujbhatia09@gmail.com
Additional Information:-
(1) Gross profit ratio is 30%
(2) Net profit before interest and 40% tax : Rs. 216000
(3) Stock on 01-04-2007 was Rs. 270000
(4) Debt collection period : 73 days (year is of 365 days)
(5) Cash sales was 20% of total sales.
Work out the following ratios:-
(1) Net profit (after tax) ratios. (2) Return on capital employed. (3) Earning on equity share
capital. (4) Stock turnover. (5) Current ratio. (6) Debt- equity ratio.
5. Cost of sales Rs. 3,00,000, Inventory Turnover Ratio = 6 times. Find out of opening stock, if opening
stock is Rs. 10,000 less than the closing stock.
6. A traders carries an average stock of Rs. 40,000. His stock turnover ratio is 8 times. If he sells goods at a
profit of 20% on sales, find out his profit.
7. From the following particulars, determine the debtors at the end of the year.
Credit Sales Rs. 14,60,000
Credit Collection Period 73 days
Debtors (Beginning of the year) Rs. 2,84,000
8. Calculate the current assets of a company, from the following information.
(1) Stock turnover 4 times
(2) Stock at the beginning is Rs. 10,000 more than the stock at the end.
(3) Sales (all credit) Rs. 1,60,000
(4) Gross Profit Ratio Rs. 25%
(5) Current Liabilities Rs. 80,000
(6) Liquidity Ratio : 1.5:1
(7) Assume, all current liabilities are liquid liabilities and all current assets, expect, stock are
liquid assets.
9. Work out Stock Turnover
1. Current Ratio = 2.5:1, Liquid Ratio = 1.25:1
2. Working Capital = Rs. 3,00,000, Bank Overdraft = 40,000 and Gross Profit = 4,50,000
3. Gross Profit Ratio = 25%
4. The opening stock is two third (2/3) of the closing stock.
10. Complete the balance sheet and sales data (fill in the blanks) using the following financial data.
Consider an year to consist of 360 days.
Debt-equity ratio : 0.6
Acid-test ratio : 0.5
Total asset turnover : 2
Days’ sales outstanding in accounts receivable : 13.5 days
Gross profit margin : 37.5 percent
Inventory turnover ratio : 5
Balance Sheet
Equity capital 150,000 Fixed assets ----------
Retained earnings 100,000 Inventories ----------
Long-term debt 70,000 Accounts receivable ----------
Short-term debt ---------- Cash ----------
---------- ----------
Profit & Loss
Sales ----------
Cost of goods sold ----------

8. Ratio Analysis
8 | Prepared By: Anuj Bhatia [BBA (Gold Medalist), M.Com (Gold Medalist), CA(Inter.), CMA(INTER), G-SLET, UGC NET-JRF, Ph.D (Pur.)]
Contact: (M) 9898251471 E-mail: anujbhatia09@gmail.com
11. From the following information, complete the B/S given below:
Total Debt to Net Worth : 0.5 : 1
Total Asset T/o : 2 times
Gross Profit: 30%
Avg Collection Period (360 days in a year): 40 Days
Inventory T/o : 3 Times
Acid Test Ratio: 0.75 to 1
Balance-Sheet
Liabilities (Rs.) Assets (Rs.)
Common Stockl 200000 Plant and Equipment
Retained Earnings 300000 Inventory
Current Liabilities Accounts Receivables
Cash
-------- -------
12. From the following information, complete the B/S given below:
Sales: Rs. 36 Lakhs
Total Asset T/o : 3
Fixed Asset T/o : 5
Current Asset T/o: 7.5
Inventory T/o: 20
Debtor T/o: 15
Total Asset/Net worth: 2.5
Debt-Equity ratio: 1
All T/O ratios are based on sales.
13. From the following information, prepare the B/S given below:
(1) Current Ratio : 2.75
(2) Acid Test ratio: 2.25
(3) Working Capital: Rs. 350000
(4) Reserve and Surplus: Rs. 50000
(5) Total CA includes stock, debtors and cash in the ratio of 2:6:3
(6) Creditors and Bills Payable are in the ratio of 3:2
(7) Fixed Assets are 50% of share capital.
(8) Share capital is Rs. 6,00,000
14. From the following information, Prepare Trading Account & B/S given below:
Stock T/o : 6 times
Gross Profit Margin: 20%
Capital T/o: 4
Debt Collection Period: 3 months
Creditors Payment Period: 2 months
GP: Rs. 60,00,000
Excess of closing stock over opening stock: Rs. 5,00,000
All sales and purchase are on credit basis. The balancing figure
is the bank balance.
15. From the following information, Prepare Trading Account & B/S given below:
GP Ratio : 25%
Sales/Inventory Ratio: 10
Capital/Total Liabilities: ½
Fixed Asset/Total CA: 5/7
Closing Stock: Rs. 100000
Net Profit/ Sales: 20%
Net Profit/Capital: ¼
FA/Capital: 5/4
Fixed Asset: Rs. 10,00,000

9. Ratio Analysis
9 | Prepared By: Anuj Bhatia [BBA (Gold Medalist), M.Com (Gold Medalist), CA(Inter.), CMA(INTER), G-SLET, UGC NET-JRF, Ph.D (Pur.)]
Contact: (M) 9898251471 E-mail: anujbhatia09@gmail.com
16. From the following information, prepare the B/S given below:
Current Ratio: 2.5
Liquid Ratio: 1.5
Proprietory Ratio (FA/PF): 0.75
Working Capital: Rs. 60,000
Reserves and Surplus: Rs. 40000
Bank O/D: Rs. 10,000
There is no long term loan or Fictitious Assets.
17. Draw up the B/S of co. from the following information:
CL: 1
CA: 2.5
LR: 1.5
Stock T/o: 6
FA T/o: 2
GP Ratio: 20%
Debt Collection Period: 2 months
Working Capital: Rs. 3,00,000
Sharehoders Capital: Rs. 5,00,000
Reserve and Surplus: Rs. 2,50,000
18. Draw up the B/S of co. from the following information:
Estimated Sales: Rs. 4,50,000
Sales to Net Worth: 2.5 Times
Total Debt to Net Worth: 65%
CL to Net Worth: 25%
CR: 3.6
Sales to Inventory: 5 times
ACP: 36 days in a year of 360 days
FA to NW: 75%
19. Draw up the B/S of co. from the following information:
Stock T/o (Based on COGS): 6
Capital T/o(Based on COGS): 2
FA T/o (Based on COGS): 4
GP ratio: 20%
Debtors Velocity: 2 months
Creditors Velocity: 73 Days
The GP was Rs. 60,000. Reserves and Surplus amounted to Rs. 20,000. Closing stock was Rs. 5000 in
excess of opening stock.