RATIO FORMULA CALCULATIONGross Profit Ratio (Sales - COGS)/ Sales (3000000-200000)/3000000Net profit ratio Net Profit/Sales 300000/3000000Debt- Equity ratio Debt/Equity 250000/500000Current ratio Current Assets/Current Liabilities 600000/200000Quick ratio Quick Assets/Quick Liabilities

(CA-Stock)/Quick Liabilities (600000-200000)/200000

ANSWER33.33%

10%1:23:1

2:1

RATIO FORMULA CALCULATION ANSWERGross Profit Ratio (Sales - COGS)/ Sales (600000-480000)/600000 20.00%Stock Turnover Ratio COGS/AVG. Stock 480000/(116000+124000)/2 4 timesDebtors Turnover Ratio Turnover/Avg.Debtors 600000/64000 9.375 times

Calculating COGS

Stock at the beginning of the year 10,000ADD:Carriage 2,500Purchases 25,000

37,500Less:Stock at the end of the year 5,000COGS 32,500

Stock Turnover Ratio COGS/AVG. Stock 32500/(10000+5000)/2

4.333 times

Calculation of Equity Rs.

Equity Share Capital 75,000Preference Share Capital 25,000General Reserve 50,000Accumulated Profits 30,000Less:Preliminary Expenses to be Written-off -5,000Equity 175,000Debentures 75,000

Debt Equity Ratio = Debt/Equity = 75000/175000= 3:7

Calculation of Total Assets

Equity Share Capital 75,000Preference Share Capital 25,000General Reserve 50,000Accumulated Profits 30,000Debentures 75,000Creditors 40,000O/s Expenses 10,000Less:Preliminary Expenses to be Written-off -5,000Total Assets(TA) 300,000

Total Assets to Debt ratio = TA/Debt= 300000/75000= 4 times

Proprietory Ratio = Equity/ Total Assets = 175000/300000= 7:12

2013Calculating COGS

Sales 2400000Less: GP (25%) 600000COGS 1800000

Stock Turnover Ratio COGS/AVG. Stock 1800000/(600000+900000)/2 2.4 times

Debtors Turnover Ratio Turnover/Avg. Debtors 2400000/(500000+560000)/2 4.53 times

RATIO FORMULAGross Profit Ratio (Sales - COGS)/ SalesInventory Turnover Ratio COGS/AVG. StockCurrent ratio Current Assets/Current LiabilitiesQuick ratio Quick Assets/Quick Liabilities

(CA-Stock)/Quick LiabilitiesNet Profit Ratio profit/salesWorking Capital ratio Sales/ (CA-CL)

CALCULATION ANSWER(2520000-1920000)/2520000 23.80%1920000/800000 2.4760000/600000 1.266667

(760000-80000)/600000 1.133360000/2520000 0.1428572520000/(760000-600000) 15.75

Balance Sheet

Mar '08 Mar '09 Leverage12 mths 12 mths debt-equity ratio

Sources Of Funds debt/equity58 117 BF/OF

Reserves 9471 12318 Interest Coverage RatioRevaluation Reserves 26 25 PBIT/INTNetworth 9555 12460

Secured Loans 309 1102

Unsecured Loans 3275 5454

Total Debt 3584 6556

Total Liabilities 13139 19016

Mar '08 Mar '09

Gross Block 4,189 5,575

Less: Accum. Depreciation 1,242 1,421

Net Block 2,946 4,154

699 1,041

Investments 6,922 8,264 LiquidityInventories 4,306 5,805 Current RatioSundry Debtors 7,365 10,056 CA/ CLFixed Deposits 185 82

Cash and Bank Balance 780 693

Loans and Advances 3,861 7,199

Total CA, Loans & Advances 16,496 23,835

Current Liabilities 11,893 15,211

Provisions 2,035 3,067

Total CL & Provisions 13,928 18,278

Net Current Assets 2,568 5,557

Miscellaneous Expenses 3 0

Total Assets 13,139 19,016

Contingent Liabilities 1014 1372

Book Value 326 212

Market Price 2000 1649.3

Sales Turnover 25,280 34,250 PROFITABILITY Operating Profit 3,239 4,142 EBIDTAPBDIT 3,856 5,755 EBIDTA/SALESInterest 502 770

PBDT 3,354 4,985 NPMPBT (Post Extra-ord Items) 3,155 4,658 NPAT/SALESTax 982 1,176

Reported Net Profit 2,173 3,482 ROCE or ROIWN PBIT/Cap EmplPBIT 3,657 5,428PBT 3,155 4,658 RONW or ROEINTEREST 502 770 PAT/NW

Equity Share Capital

Application Of Funds

Capital Work in Progress

EPSPAT/No of equity shares

P/E RATIOPrice/EPS

TURNOVER RATIOSFA Turnover ratiossales/FA

Inventory Turnover ratiossales/inventory

days of inventoryinventory/(sales/365)

38% 53% INCREASE3584 65569555 124607.28 7.05

3,657 5,428502 770

1.184377 1.304027 INCREASE16,496 23,83513,928 18,278

15% 17% INCREASE3,856 5,755

25,280 34,2509% 10%

2,173 3,48225,280 34,250

28% 29%3,657 5,428

13139 1901623% 28%

2,173 3,4829555 12460

37.46552 29.760682,173 3,482

58 11753.38242 55.41875

2000 1649.337.46552 29.76068

8.58 8.2525,280 34,250

2,946 4,1545.87 5.90

25,280 34,2504,306 5,805

62 624,306 5,805

69.26027 93.83562

Liquidity And Solvency RatiosCurrent Ratio 1.28 1.46Quick Ratio 1.69 1.54Debt Equity Ratio 0.69 0.6Long Term Debt Equity Ratio 0.53 0.5

Profitability RatiosOperating Profit Margin(%) 10.26 20.54Profit Before Interest And Tax Margin(%) 3.02 13.82Gross Profit Margin(%) 3.11 14.22

Management Efficiency RatiosInventory Turnover Ratio 23.24 25.93Debtors Turnover Ratio 9.23 8.79Investments Turnover Ratio 23.24 25.93Fixed Assets Turnover Ratio 0.62 0.69Total Assets Turnover Ratio 0.61 0.7Asset Turnover Ratio 0.62 0.69

Q 2The summarised Balance Sheet of Optica Cables Ltd. is given below with other relevant details:

Balance Sheet Liabilities Rs. Assets

Equity capital 4000000 Fixed assets (net)Reserves and surplus 600000 Preliminary ExpSundry creditors 1250000 Cash Loan 11% 200000 Debtors

Inventories6050000

Other information:SalesLess: Cost of Production of goods sold

Less: Selling and administrationNet Operating ProfitThe current industry average of a few important ratios is given below:Current ratio 1.4 CA/CLROI 24 NOP/E+DFA turnover 9 TURN/FAROE 42Liquid ratio 1.2Debtors turnover 8Inventory turnover 10.2GP Ratio 25Debt Equity 0.54Operating Ratio 85NP Ratio 14Asset TO Ratio 2.7

Calculate the above ratios, compare the same with the industry average and comment briefly.

The summarised Balance Sheet of Optica Cables Ltd. is given below with other relevant details: Balance Sheet

Rs.

280000050000

240000186000011000006050000

(Rs.)75000004600000290000012500001650000

2.560.34375

2.678571429

Calculate the above ratios, compare the same with the industry average and comment briefly.

Solution Dec '09 Dec '10 Positive/ NegativeCurrent Ratio 1.124324 1.40535 0.281025469914359Quick Test 1.124324 1.40535 0.281025469914359EBIT(%) 31.60286 35.21614 3.61328303975674Net Profit Margin NPM(%) 0.252433 0.312968 0.0605348149616533

0.193407 0.19064 -0.0027678406580267Return on Total Assets ROTA(%) 0.149478 0.165538 0.0160595871463429Return on Equity ROE(%) 15.46105 16.94757 1.48651625849246Earnings per Share EPS ` 14.96154 14.28947Asset Turnover 0.47299 0.470062 -0.0029272504136703Accounts Receivable Turnover 2.756708 5.102941 2.34623276859939Average Collection Period (days) 132.4043 71.52738 -60.8769054115465Debt - Equity Ratio 0.000795 0.000312 -0.0004828026969468Price/Earnings PE Ratio 32.34961 31.49171 -0.857901688704565

Return on Capital Employed/Return on Investment ROCE(%)