Question
31:
Total Assets `11,00,000; Fixed Assets `5,00,000;
Capital Employed
`10,00,000. There were no Long-term Investments.
Calculate Current Ratio.
Answer:
Current Assets = Total Assets − Fixed Assets
Fixed Assets = 5,00,000
Total Assets = 11,00,000
∴ Current Assets = 11,00,000 − 5,00,000 = 6,00,000
Current Liabilities = Total Assets − Capital Employed
= 11,00,000 − 10,00,000 = 1,00,000
Current ratio= Current Assets/
Current liabilities=6,00,000/1,00,000=6:1
Question
32:
Capital Employed `20,00,000; Fixed Assets `14,00,000; Current Liabilities `2,00,000. There are no Long-term Investments. Calculate Current Ratio.
Answer:
Capital Employed = 20,00,000
Fixed Assets = 14,00,000
Current Assets = Capital Employed + Current Liabilities − Fixed Assets
= 20,00,000 + 2,00,000 − 14,00,000 = 8,00,000
Current ratio= Current Assets/
Current liabilities=8,00,000/2,00,000=4:1
Question
33:
From
the following calculate: (i) Current Ratio; and (ii) Quick Ratio:
|
|
` |
|
|
` |
|
Total Debt |
12,00,000 |
|
Long-term Borrowings |
4,00,000 |
|
Total Assets |
16,00,000 |
|
Long-term Provisions |
4,00,000 |
|
Fixed Assets (Tangible) |
6,00,000 |
|
Inventories |
1,90,000 |
|
Non-current Investment |
1,00,000 |
|
Prepaid Expenses |
10,000 |
|
Long-term Loans and
Advances |
1,00,000 |
|
|
|
Answer:
(i)
Current ratio
Current RatioCurrent Assets=Total Assets-Fixed Assets-Non-Current Investment - Long term Loans and Advances
=16,00,000-6,00,000-1,00,000-1,00,000=
` 8,00,000
Current Liabilities=Total Debt - Non-Current Liabilities
=12,00,000-4,00,000-4,00,000=
` 4,00,000
Current Ratio=Current AssetsCurrent Liabilities
=8,00,000/4,00,000=2:1
(ii)
Quick Ratio
Quick Assets=Current Assets-Stock-Prepaid Expenses
=8,00,000-1,90,000−10,000=
` 6,00,000
Quick Ratio=Quick Assets/Current Liabilities
=6,00,000/4,00,000=1.5:1
Question
34:
Following is the Balance Sheet of Crescent Chemical Works Limited as at 31st March, 2021:
|
Particulars |
Note |
` |
|
I. EQUITY AND LIABILITIES : |
|
|
|
(a) Share Capital |
|
70,000 |
|
(b) Reserves and Surplus |
|
35,000 |
|
|
|
|
|
2. Non-Current Liabilities : |
|
|
|
Long-term Borrowings |
|
25,000 |
|
|
|
|
|
3. Current Liabilities : |
|
|
|
(a) Short-term Borrowings |
|
3,000 |
|
(b) Trade Payables (Creditors) |
|
13,000 |
|
(b) Short-term Provisions: Provision for Tax |
|
4,000 |
|
Total |
|
1,50,000 |
|
II. ASSETS : |
|
|
|
1. Non-Current Assets |
|
|
|
(a) Fixed Assets (Tangible) |
|
45,000 |
|
(b) Non-current Investments |
|
5,000 |
|
|
|
|
|
2. Current Assets |
|
|
|
(a) Inventories (Stock) |
|
50,000 |
|
(b) Trade Receivables (Debtors) |
|
30,000 |
|
(c) Cash and Cash Equivalents |
|
20,000 |
|
Total |
|
1,50,000 |
Compute Current Ratio and Liquid Ratio
Answer:
Current Assets = Inventory + Trade Receivables + Cash and Cash Equivalents
= 50,000 + 30,000 + 20,000 = 1,00,000
Current Liabilities = Short-term Borrowings + Trade Payables + Provision for Tax
= 3,000 + 13,000 + 4,000 = 20,000
Quick Assets = Trade Receivables + Cash and Cash Equivalents
= 30,000 + 20,000 = 50,000
Current ratio= Current Assets/ Current
liabilities=1,00,000/20,000=5:1
Quick ratio= Liquid Assets/ Current
liabilities=50,000/20,000=2.5:1
Comments:
1. Ideal Current Ratio for a business is considered to be 2:1. But in this case the ratio is quite high i.e. 5:1. This may be due to the following reasons:
(i) Blockage of Funds in Stock
(ii) High Amount outstanding from Debtors
(iii) Huge Cash and Bank Balances
2. Ideal Quick Ratio of a business is supposed to be 1:1. This implies that Liquid Assets should be equal to the Current Liabilities. But in the given case Quick Ratio is 2.5 : 1 which indicates that the Liquid Assets are quite high in comparison to the Current Liabilities.
Question
35:
Total Assets ` 2,60,000; Total Debts ` 1,80,000; Current Liabilities ` 20,000. Calculate Debt to Equity Ratio.
Answer:
Total Debts = 1,80,000
Current Liabilities = 20,000
Long-term Debts = Total Debts − Current Liabilities
= 1,80,000 − 20,000 = 1,60,000
Equity = Total Assets − Total Liabilities
= 2,60,000 − 1,80,000 = 80,000
Debt equity ratio= Long-term Debt
/equity=1,60,000/80,000=2:1
Class : 12th | Ts Grewal solution 2022-2023
Volume 3 | Chapter 4: Accounting Ratio
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