1. Pioneer Stationeries Ltd.

has the following balance sheet and income statement for the
financial year 2013-14.
Balance sheet as on March 31, 2014
Owners equity and
liabilities

(Rs. in lakhs)

Assets

(Rs. in
lakhs)

Paid up equity share capital

250

Net fixed assets

250

Reserves and surplus

250

Investments (long-term)

100

Sundry creditors

110

Inventories

150

Accrued expenses

50

Sundry debtors

150

Provisions

40

Cash and bank

50

700

700

Income statement for the year ended March 31, 2014

(Rs. in lakhs)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Profit before tax
Tax
Profit after tax

1600
1250
350
100
250
75
175

It is assumed that the sales are entirely on credit basis.

You are required to
a.

Calculate:
i. Current ratio
ii. Acid-test ratio
iii. Average collection period
iv. Debt-equity ratio
v. Return on investment
vi. Return on equity.
vii. GP ratio
(Assume 1 year = 360 days)

b. Calculate the current ratio and the debt equity ratio if the inventories grow by 40%,
and long-term debt is raised to the extent of 50% of the increase in inventories,
reserves and surplus increase by 25% of the increase in inventories and trade
credit increases by 25% of the increase in inventories.

c.

Comment on the change in the current ratio and the debt-equity ratio.