EXAMPLE |2| The working capital of Washington Ltd is

10,00,000. Its total debtS amount to 7 25,00,000, out of

which long-term debts are of 7 20,00,000. Calculate the
current ratio of Washington Ltd
EXAMPLE |4| The current assets of Highrise Ltd were
10,00,000 and its current liabilities amounted to
4,00,000. Calculate current ratio if
(i) it purchased goods of 7 50,000 on credit.
(ü) it paid 50,000 to a creditor.
 is 2.1: 1.2.
EXAMPLE 191 The current ratio of a company
State with reasons which of the following transactions will
ratio.
increase, decrease or not change the
(i) Redeemed 9% debentures of 1,00,000 at a premium
of 10%.
(il) Received from debtors 17,000.
(ii) Issued 7 2,00,000 equity shares to the vendors of
machinery.
(iv) Accepted bills of exchange drawn by the creditors
7 7,000. AI 2015
EXAMPLE 17 Future Secure, an insurance company
wants to maintain a current ratio of 2: 1. Find
() the amount of current liabilities that should be paid
off to achieve that ratio, given that the current
assets and current liabilities are 6,00,000 and
74,00,000 respectively.
(ii) the amount of current assets that could be purchased
on credit to maintain that ratio, given that its
current assets and current liabiities are 6,00,000
and 2,00,000 respectively.
EXAMPLE |16| The quick ratio of a company is 2 : 1.
State giving reasons (for any four), which of the followinq
would improve, reduce or not change the ratio.
(i) Purchase of machinery for cash.
1i) Purchase of goods on credit.
(ii) Sale of furniture at cost.
(iv) Sale of goods at a profit.
(v) Cash received from debtors. Delhi 2011C
EXAMPLE 132| From the following information, calculate total assets to debt ratio of M/s Kundan
Pharmacy.
Amt ()
Capital employed 15,00,000
Investments 1,75,000
Land 5,00,000
Trade receivables 1,50,000
Cash and cash equivalents 80,000
Equity share capital 6,00,000
8% Debentures 1,75,000
Capital reserve 25,000
Surplus, i.e. balance in the statement of profit andloss (15,000)
EXAMPLE |38| From the following information calculate Interest coverage ratio.
Profit after interest and tax 7 4,97,000
Rate of income tax 30%
12% debentures 6,00,000
 EXAMPLE |41| Calculate inventory turnover ratio
from the data given below
Inventory at the beginning of the year< 10,000, inventory
atthe end of the year 5,000, carriage 2,500, revenue
from operations i.e. sales 50,000, purchases 25,000.
EXAMPLE |43| Compute inventory turnover ratio from
the following information.
Revenue from operations, i.e. net sales 2,00,000, gross profit
50,000, closing inventory 7 60,000, excess of closing
inventory over opening inventory 20,000. NCERT
EXAMPLE |49 The credit sales of M/s Sun Farms Ltd,
amounted to 7 10,50,000. Its debtors and bills receivables
at the end of the accounting period amounted to
71,00,000 and 7 75,000 respectively. Calculate its debtor's
turnover ratio and also collection
weeks and months.
period in terms of days,
EXAMPLE |57| From the following particulars obtained
from the books of XYZ Ltd, calculate the creditors turnover
ratio and average payable period.
Total purchases 85,000, cash purchases 8,000, purchases
return 4,000, creditors at the end of the year 716,000,
creditors in the beginning 7 12,000.
 7 The average inventory of Ramesh Ltd amounts
to 25,000. Its stock turnover ratio is
of 6 times.
It is the policy of the company to sell goods at
20% profit on sales. Find out the profit of the
company.
Ans Profit = 37,500

8 The opening and closing stock of Subhadhra Ltd

were 47,500 and 62,500 respectively. Its
annual sales amounted to 7 5,75,000. The
company's policy is to earn a profit of 33% on
3
cost. Calculate its inventory turnover ratio.
Ans Inventory turnover ratio = 7.84 times

Hint: 33-% on cost is the same as 25% on sales.

3

9 The inventory turnover ratio of Calculus Ltd is

6 times. Its closing inventory was 50,000 less
than the opening inventory. It's net sales
amounted to 7 25,00,000 and the gross profit
ratio was 15%. It's current liabilities amounted to
2,50,000 and its quick ratio was 1.25. Compute
it's current ratio.
Ans Current ratio = 2.57: 1

10 From the following information, calculate

the debtors' turnover ratio.

Opening debtors 7 3,700, closing debtors

4,300, revenuefrom operations (sales)
T 60,000, cash sales 8,000.
Ans Debtors turnover ratio =13 times

11 From the information given below, find out

o r average collectiobn
average age of receivables
Revenue
period in months, days and weeks.
from operations (net credit sales)
26,280, debtors 4,000, bills receivables
320.