Você está na página 1de 19

JAIBB

ACCOUNTING FOR FINANCIAL SERVICES (AFS)

MATHEMATICS

RATIO CALCULATION

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL


Formulas for Various types of Ratio Calculation
(i). Current Assets Cash + Accounts Receivables + Inventory
Current Ratio = =
Current Liabilities Accounts Payable
(ii). Current Assets - Inventories - Prepaid Expenses
Quick or Acid Test Ratio =
Current Liabilities
Cash + Marketable Securities + Receivables
Or, Quick or Acid Test Ratio =
Current Liabilities
(iii). Net Sales
Receivables Turnover =
Average Receivables
Average Receivables Average Receivables
or, Receivable Turnover = 
Average Daily Sales Net Sales  365
(iv). Net Cash Provided by Operating Activities
Cash Return on Sales =
Net Sales
(v). Net Cash Provided by Operating Activities
Cash Debt Average/Coverage =
Average Liabilities

(vi). Gross Profit Net Sales - Cost of Goods Sold


Gross Profit Ratio =  100 =  100
Net Sales Net Sales
(vii). Net Income
Net Profit Ratio / Profit Margin =  100
Net Sales
(viii). Cost of Goods Sold
Inventory Turnover =
Average Inventory

(ix). Net Sales


Asset Turnover =  100
Average Assets
(x). Net Income
Return on Assets =
Average Assets
(xi). Net Income (Assumed after Tax)
Return on Common Stockholders Equity =  100
Average Common Stock
(xii). Total Debt
Debt to Total Assets Ratio =  100
Total Assets
(xiii). Net Cash Provided by Operating Activities
Current Cash Debt Coverage =
Average Current Liabilities
(xiv). Absolute Liquid Assets Cash (Assets)
Absolute Liquid Ratio = 
Absolute Liquid Liabilities Cash (Liabilities)

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 2


Question # 1 [November-2010]
 Padma Company has the following comparative Balance Sheet Data :—
Padma Company
Balance Sheet
December 31
2009 2008
(Taka) (Taka)
Cash 15,000 30,000
Receivables (net) 65,000 60,000
Inventories 60,000 50,000
Plant Assets (net) 2,05,000 1,80,000
3,45,000 3,20,000
Accounts Payable 50,000 60,000
Mortgage Payable (15%) 1,00,000 1,00,000
Common Stock (10 per) 1,40,000 1,20,000
Retained Earnings 55,000 40,000
3,45,000 3,20,000
Additional Information for 2009 :
(i). Net Income was Tk. 25,000;
(ii). Sales on accounts were Tk. 4,20,000, Sales Returns and Allowances amounted to
Tk. 20,000;
(iii). Cost of goods sold was Tk. 1,98,000;
(iv). Net cash provided by operating activities was Tk. 33,000;
Requirements :
Compute the following ratios at December 31, 2009 and make comments on these :
(i). Caurrent Ratio; (ii). Acid Test Ratio;
(iii). Receivables Turnover; (iv). Cash Return on Sales;
(v). Cash Debt Average; (vi). Gross Profit Ratio;
(vii). Net Profit Ratio;
Answer (1) :
(i). Current Ratio (PjwZ AbycvZ) t [‡Kv‡bv cÖwZôv‡bi †gvU PjwZ m¤úwˇK †gvU PjwZ `vq w`‡q fvM
Ki‡j †h AbycvZ cvIqv hvq, Zv‡K PjwZ AbycvZ e‡j|]
Current Assets
 Current Ratio =
Current Liabilities
Here, for December 31, 2009,
Current Assets = Cash + Receivables (net) + Inventories
 Current Assets = 15,000 + 65,000 + 60,000 = 1,40,000
and Current Liabilities = Accounts Payable = 50,000
1,40,000
 Current Ratio =  2.8  1
50,000
Comments : The Standard value for Current Ratio is 2:1. Here the calculated ratio is
2.8:1, which exceeds the standard. So the financial position of Padma
Company is sound and it has ability to pay the current liabilities.

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 3


(ii). Quick or Acid Test Ratio (`ª“Z ev Z¡wor AbycvZ)
[†h mKj PjwZ m¤úwˇK Zr¶bvr bM` UvKvq iƒcvš—i Kiv hvq ev bM‡`i mgZzj¨ †m mKj PjwZ m¤úwˇK
Quick Current Assets e‡j| Gi g‡a¨ Inventories Ges Prepaid Expenses Aš—f©y³ Kiv nq bv,
†Kbbv GUv AwZ `ª“Z bM‡` iƒcvš—i Kiv m¤¢e nq bv|]
Current Assets - Inventories - Prepaid Expenses
 Quick or Acid Test Ratio =
Current Liabilities
Cash + Marketable Securities + Receivable
Or, Quick or Acid Test Ratio =
Current Liabilities
Here, for December 31, 2009 : Qucik Assets = Cash + Receivables (net)
 Quick Assets = 15,000 + 65,000 = 80,000
Current Liabilities = Accounts Payable = 50,000
80,000
 Acid Test Ratio =  1.6 : 1
50,000
Comments : The Standard value for Acid test Ratio is 1:1. Here the calculated ratio is
1.6:1, which exceeds the standard. So the financial position of Padma
Company is sound and it has ability to pay the current liabilities.
(iii). Receivables Turnover (‡`bv`vi AveZ©b AbycvZ)
Net Sales
Receivables Turnover =
Average Receivables
Here, Net Sales = Sales on Accounts - Sales Returns = 4,20,000 - 20,000
 Net Sales = 4,00,000
Average Receivables = (Receivables in 2009 + Receivables in 2008)  2
= (65,000+60,000)  2 = 62,500
4,00,000
 Receivables Turnover = = 6.4 times, i.e. 365  6.4 = 57 days
62,500
Comments : Normally credit is allowed for 60 to 90 days. This ratio shows 57 days. So
the cash collection from Receivable is satisfactory.
(iv). Cash Return on Sales
Net Cash Provided by Operating Activities
Cash Return on Sales =
Net Sales
Here, Net Cash Provided by Operating Activities = 33,000
Net Sales = 4,00,000
33,000
 Cash Return on Sales =  0.0825  8.25%
4,00,000

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 4


(v). Cash Debt Average
Net Cash Provided by Operating Activities
Cash Debt Average =
Average Liabilities
Here, Net Cash Provided by Operating Activities = 33,000
Average Liabilities = [(Accounts Payable + Mortgage Payable) in 2009
+ (Accounts Payable + Mortgage Payable) in 2008]  2
= [(50,000+1,00,000) + (60,000 + 1,00,000)]  2 = 1,55,000
33,000
 Cash Debt Average =  0.2129 times
1,55,000
(vi). Gross Profit Ratio
Gross Profit
Gross Profit Ratio =  100
Net Sales
Here, Net Sales = 4,00,000
Gross Profit = Net Sales - Cost of Goods Sold = 4,00,000 - 1,98,000
 Gross Profit = 2,02,000
2,02,000
 Gross Profit Ratio =  100  0.505  100  50.5%
4,00,000
Comments : Standard Ratio in this case is 20% to 30% and the calculated ratio is 50.5%.
So it is exceptionally satisfactory.
(vii). Net Profit Ratio

Net Income
Net Profit Ratio =  100
Net Sales
Here, Net Sales = 4,00,000 and Net Income = 25,000
25,000
 Net Profit Ratio = 100  0.0625 100  6.25%
4,00,000

Comments : Standard Ratio in this case is 5% to 10% and the calculated ratio is 6.25%,
which exceeds the lower limit of standard. This ratio is not highly
satisfatory.



Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 5


Question # 2 [May-2011]
 Scully Corporation’s comparative Balance Sheets are presented below :—
Scully Corporation
Balance Sheet
December, 31
2010 (Taka) 2009 (Taka)
Cash 4,300 3,700
Accounts Receivable 21,200 23,400
Inventory 10,000 7,000
Land 20,000 26,000
Building 70,000 70,000
Accumulated Depreciation (15,000) (10,000)
1,10,500 1,20,100
Accounts Payable 12,370 31,100
Common Stock 75,000 69,000
Retained Earnings 23,130 20,000
1,10,500 1,20,100
Scully’s 2010 income statement included Net Sales of Tk. 1,00,000, Cost of Goods Sold of
Tk. 60,000 and Net Income of Tk. 15,000.
Requirements : Compute the following ratios for 2010 :
(i). Caurrent Ratio; (ii). Acid Test Ratio;
(iii). Receivables Turnover; (iv). Inventory Turnover;
(v). Profit Margin; (vi). Asset Turnover;
(vii). Return on Assets; (viii). Return on Common Stockholders Equity;
(ix). Debt to Total Assets Ratio;
Answer (2) :
(i). Current Ratio
For 2010, Current Assets = Cash + Accounts Receivables + Inventory
Current Assets = 4,300 + 21,200 + 10,000 = 35,500
Current Liabilities = Accounts Payable=12,370
Current Assets 35,500
 Current Ratio = =  2.87 1
Current Liabilities 12,370
(ii). Quick or Acid Test Ratio
For 2010, Quick Assets = Cash + Accounts Receivable
 Quick Assets = 4,300 + 21,200 = 25,500
Current Liabilities = Accounts Payable = 12,370
Quick Assets 25,500
 Acid Test Ratio = =  2.06 : 1
Current Liabilities 12,370

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 6


(iii). Receivables Turnover
Here, Net Sales = 1,00,000
Average Receivables = (Receivables in 2010 + Receivables in 2009)  2
= (21,200+23,400)  2 = 22,300
Net Sales 1,00,000
 Receivable Turnover = = = 4.48 times,
Average Receivables 22,300
i.e. 365  4.48 = 81.47 days
(iv). Inventory Turnover
Here, Cost of Goods Sold = 60,000
Average Inventory = (Inventory in 2010 + Inventory in 2009)  2
= (10,000+7,000)  2 = 8,500
Cost of Goods Sold 60,000
 Inventory Turnover = =  7.06 times
Average Inventory 8,500
(v). Profit Margin on sales / Net Profit ratio
Here, Net Income = 15,000 and Net Sales = 1,00,000
Net Income
 Profit Margin on Sales/Net Profit Ratio =  100
Net Sales
15,000
=  100  15%
1,00,000
(vi). Asset Turnover
Here, Net Sales = 1,00,000
Average Assets = (Assets in 2010 + Assets in 2009)  2
= (1,10,500+1,20,100)  2 = 1,15,300
Net Sales
 Asset Turnover =  100
Average Assets
1,00,000
=  100  0.8673  100  86.73%
1,15,300
(vii). Return on Assets
Here, Net Income = 15,000
Average Assets = (Assets in 2010 + Assets in 2009)  2
= (1,10,500+1,20,100)  2 = 1,15,300
Net Income 15,000
 Return on Assets = =  0.13 :1
Average Assets 1,15,300

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 7


(viii). Return on Common Stockholders Equity

Here, Net Income = 15,000


Average Common Stock
=  Common Stock in 2010+Common Stock in 2009   2
= (75,000+69,000)  2 = 72,000
 Return on Common Stockholders Equity
Net Income (Assumed after Tax)
=  100
Average Common Stock
15,000
=  100  20.53%
72,000
(ix). Debt to Total Assets Ratio
Here, Total Debt = Current Liabilities = 12,370
Total Assets = 1,10,500
Total Debt 12,370
 Debt to Total Assets Ratio =  100 =  100  11.19%
Total Assets 1,10,500


Question # 3 [May-2012]
 Jamuna Company Ltd. has the following comparative Balance Sheet :—
Jamuna Company Ltd.
Balance Sheet
December, 31
2011 2010
Taka Taka
Cash 30,000 45,000
Accounts Receivables 95,000 90,000
Inventories 70,000 60,000
Plant Assets 2,00,000 1,90,000
3,95,000 3,85,000
2011 2010
Taka Taka
Accounts Payable 65,000 75,000
Mortgage Payable (15%) 1,30,000 1,30,000
Common Stock 1,50,000 1,30,000
Retained Earnings 50,000 50,000
3,95,000 3,85,000
Additional Information for 2011 :
(i). Net Income was Tk. 25,000;
(ii). Sales on account were Tk. 4,20,000; Sales Returns and Allowances were Tk.
20,000;
Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 8
(iii). Cost of goods sold was Tk. 1,98,000;
(iv). Net cash provided by operating activities was Tk. 33,000;
Requirements : Compute the following ratios at December 31, 2011 and make comments
on those :
(i). Caurrent Ratio; (ii). Acid Test Ratio;
(iii). Receivables Turnover; (iv). Cash Return on Sales;
(v). Cash Debt Coverage; (vi). Gross Profit Ratio;
(vii). Net Profit Ratio;
Answer (3) :
(i). Current Ratio
For December 31, 2011,
Current Assets = Cash + Accounts Receivables + Inventories
Current Assets = 30,000 + 95,000 + 70,000 = 1,95,000
and Current Liabilities = Accounts Payable = 65,000
Current Assets 1,95,000
Current Ratio = =  3 1
Current Liabilities 65,000
Comments : The Standard value for Current Ratio is 2:1. Here the calculated ratio is
3:1, which exceeds the standard. So the financial position of Jamuna
Company is sound and it has ability to pay the current liabilities.
(ii). Quick or Acid Test Ratio
For December 31, 2011,
Qucik Assets = Cash + Accounts Receivables
 Quick Assets = 30,000 + 95,000 = 1,25,000
Current Liabilities = Accounts Payable = 65,000
Quick Assets 1, 25, 000
 Quick or Acid Test Ratio = =  1.92 : 1
Current Liabilities 65, 000
Comments : The Standard value for Acid test Ratio is 1:1. Here the calculated ratio is
1.92:1, which exceeds the standard. So the financial position of Jamuna
Company is sound and it has ability to pay the current liabilities.

(iii). Receivables Turnover


Average Receivables Average Receivables
Receivable Turnover = 
Average Daily Sales Net Sales  365
Here, Net Sales = Sales on Accounts - Sales Returns = 4,20,000 - 20,000 = 4,00,000
 Average Daily Sales = 4,00,000  365 = 1,095.89
Average Receivables = (Receivables in 2011 + Receivables in 2010)  2
= (95,000+90,000)  2 = 92,500

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 9


92,500
 Receivable Turnover = = 84.40  84 days
1,095.89
Alternative Method
Here, Net Sales = 4,00,000
Average Receivables = (Receivables in 2010 + Receivables in 2011)  2
= (95,000+90,000)  2 = 92,500
Net Sales 4,00,000
 Receivable Turnover = = = 4.32 times,
Average Receivables 92,500
i.e. 365  4.32  84 days
Comments : Normally credit is allowed for 60 to 90 days. This ratio shows 84 days.
So the cash collection from Receivable is satisfactory.
(iv). Cash Return on Sales
Here, Net Cash Provided by Operating Activities = 33,000
Net Sales = 4,00,000
Net Cash Provided by Operating Activities
 Cash Return on Sales =
Net Sales
33,000
=  0.0825  8.25%
4,00,000
(v). Cash Debt Average
Here, Net Cash Provided by Operating Activities = 33,000
Average Liabilities = [(Accounts Payable + Mortgage Payable) in 2011
+ (Accounts Payable + Mortgage Payable) in 2010]  2
= [(65,000+1,30,000) + (75,000 + 1,30,000)]  2 = 2,00,000
Net Cash Provided by Operating Activities
 Cash Debt Average =
Average Liabilities
33,000
=  0.165 times
2,00,000
(vi). Gross Profit Ratio
Here, Net Sales = 4,00,000
Gross Profit = Net Sales - Cost of Goods Sold = 4,00,000 - 1,98,000 = 2,02,000
Gross Profit 2,02,000
 Gross Profit Ratio =  100 = 100  0.505 100  50.5%
Net Sales 4,00,000

Comments : Standard Ratio in this case is 20% to 30% and the calculated ratio is
50.5%. So it is exceptionally satisfactory.

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 10


(vii). Net Profit Ratio
Here, Net Sales = 4,00,000
Net Income = 25,000
Net Income 25,000
 Net Profit Ratio =  100 = 100  0.0625100  6.25%
Net Sales 4,00,000
Comments : Standard Ratio in this case is 5% to 10% and the calculated ratio is
6.25%, which exceeds the lower limit of standard. This ratio is not highly
satisfatory.

Question # 4 [December -2012]
 Goerge Company has the following comparative balance sheet data :—
Goerge Company
Balance Sheet
December 31
2010 2011
(Taka) (Taka)
Cash 20,000 30,000
Receivables (net) 65,000 60,000
Inventories 60,000 50,000
Plant Assets (net) 2,00,000 1,80,000
3,45,000 3,20,000
Accounts Payable 50,000 60,000
Mortgage Payable (15%) 1,00,000 1,00,000
Common Stock (10 per) 1,40,000 1,20,000
Retained Earnings 55,000 40,000
3,45,000 3,20,000
Additional Information for 2011 :
(i). Net Income was Tk. 25,000;
(ii). Sales on accounts were Tk. 4,20,000, Sales Returns and Allowances amounted to
Tk. 20,000;
(iii). Cost of goods sold was Tk. 1,98,000;
(iv). Net cash provided by operating activities was Tk. 44,000;
Requirements :
Compute the following ratios at December 31, 2011 :
(i). Caurrent Ratio; (ii). Acid Test Ratio; (iii). Receivables Turnover;
(iv). Inventory Turnover; (v). Cash Return on Sales; (vi). Cash Debt. Coverage;
(vii). Current Cash Debt Coverage;
Answer (4) :
(i). Current Ratio
For December 31, 2011, Current Assets = Cash + Receivables (net) + Inventories
Current Assets = 30,000 + 60,000 + 50,000 = 1,40,000
Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 11
and Current Liabilities = Accounts Payable = 60,000
Current Assets 1,40,000
 Current Ratio = =  2.33  1
Current Liabilities 60,000
(ii). Quick or Acid Test Ratio
For December 31, 2011,
Qucik Assets = Cash + Receivables (net)
 Quick Assets = 30,000 + 60,000 = 90,000
Current Liabilities = Accounts Payable = 60,000
Quick Assets 90,000
 Acid Test Ratio = =  1.50 : 1
Current Liabilities 60,000
(iii). Receivables Turnover
Here, Net Sales = 4,00,000
Average Receivables = (Receivables in 2011 + Receivables in 2010)  2
= (60,000+65,000)  2 = 62,500
Net Sales 4,00,000
 Receivable Turnover = = = 6.4 times,
Average Receivables 62,500
i.e. 365  6.4 = 57 days
(iv). Inventory Turnover
Here, Cost of Goods Sold = 1,98,000
Average Inventory = (Inventory in 2011 + Inventory in 2010)  2
= (50,000+60,000)  2 = 55,000
Cost of Goods Sold 1,98,000
 Inventory Turnover = =  3.60 times
Average Inventory 55,000
(v). Cash Return on Sales
Here, Net Cash Provided by Operating Activities = 44,000
Net Sales = 4,00,000
Net Cash Provided by Operating Activities
 Cash Return on Sales =
Net Sales
44,000
=  0.11  1.10%
4,00,000
(vi). Cash Debt Coverage/Cash Debt Average
Here, Net Cash Provided by Operating Activities = 44,000
Average Total Liabilities = [(Accounts Payable + Mortgage Payable) in 2010
+ (Accounts Payable + Mortgage Payable) in 2011]  2
= [(50,000+1,00,000) + (60,000 + 1,00,000)]  2 = 1,55,000

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 12


Net Cash Provided by Operating Activities
 Cash Debt Coverage =
Average Total Liabilities
44,000
=  0.2838 times  0.3 times
1,55,000

Alternative Method
Cash
Cash Debt Coverage =
Debt (M ortgage Payable)
Here, Cash = 30,000, M ortgage Payable = 1,00,000
30,000
 Cash Debt Coverage =  0.30 times
1,00,000
(vii). Current Cash Debt Coverage
Here, Net Cash Provided by Operating Activities = 44,000
Average Current Liabilities = [(Accounts Payable in 2010)
+ (Accounts Payable in 2011]  2
= [50,000 + 60,000]  2 = 55,000
Net Cash Provided by Operating Activities
 Cash Debt Coverage =
Average Current Liabilities
44,000
=  0.80 times
55,000

Question # 5 [December -2013]
 Selected comparative statement data for Willingham Products Company are presented
below. All balance sheet data are of December 31 :—
2011 2010
(Taka) (Taka)
Net Sales 76,000 72,000
Cost of goods sold 48,000 44,000
Operating Expenses 12,000 4,500
Interest Expense 700 500
Accounts Receivable 12,000 10,000
Inventory 8,500 7,500
Total Assets 58,000 50,000
Total Stockholder’s equity 43,000 32,500
Current Liabilities 14,000 8,000
Requirements : Compute the following ratios :
(i). Gross Margin; (ii). Net Margin;
(iii). Asset Turnover; (iv). Return on Equity;
(v). Current Ratio; (vi). Interest Coverage;
Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 13
Answer (5):
(i). Gross Margin
Gross Margin = Net Sales - Cost of Goods Sold
2011(Tk.) 2010 (Tk.)
A. Net Sales 76,000 72,000
B. Cost of Goods Sold 46,000 44,000
Gross Margin = (A-B) 30,000 28,000
(ii). Net Margin
Net Margin = (Gross Margin - Indirect Expenses)
= {Gross Margin - (Operating Expenses + Interest Expenses)}
2011(Tk.) 2010 (Tk.)
A. Gross Margin 30,000 28,000
B. Operating Expenses 12,000 4,500
C. Interest Expenses 700 500
Net Margin = {A-(B+C)} 17,300 23,000
(iii). Asset Turnover
Net Margin
Asset Turnover =
Total Assets
2011(Tk.) 2010 (Tk.)
A. Net Margin 17,300 23,000
B. Total Assets 58,000 50,000
A 0.30 : 1 0.46 : 1
Asset Turnover =  
B
(iv). Return on Equity
Net Margin
Return on Equity = 100
Total Equity
2011(Tk.) 2010 (Tk.)
A. Net Margin 17,300 23,000
B. Total Stockholder’s Equity 43,000 32,500
A  40% 71%
Return on Equity =   100 
B 
(v). Current Ratio
Current Assets
Current Ratio =
Current Liabilities
Accounts receivable + Inventory
=
Current Liabilities

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 14


2011(Tk.) 2010 (Tk.)
A. Accounts Receivable 12,000 10,000
B. Inventory 8,500 7,500
C. Cureent Liabilities 14,000 8,000
A + B 1.46 : 1 2.19 : 1
Current Ratio =  
 C 
(vi). Interest Coverage Ratio
Net Margin or Net Income
Interest Coverage Ratio =
Interest Expense
2011(Tk.) 2010 (Tk.)
A. Net Margin 17,300 23,000
B. Interest Expense 700 500
A 24.71 46
Interest Coverage Ratio =  
B


Question # 6
 The following Balance Sheet for XYZ Co. Ltd :—
XYZ CO. LTD.
Balance Sheet
Liabilities and Equity Tk. Assets Tk.
Equity Share Capital 2,00,000 Plant & Machinery 2,00,000
10% Preference Share 1,00,000 Land & Buildings 2,00,000
20% Debenture 1,00,000 Stock 1,50,000
Reserve & Surplus 1,00,000 Debtors 50,000
Long Term Loan 50,000 Cash 1,00,000
Creditors 1,00,000
Bank Overdraft 50,000
7,00,000 7,00,000
Requirements :
(i). Current Ratio (ii). Liquid Ratio
(iii). Absolute Liquid Ratio (iv). Proprietory Ratio
(v). Assets-proprietorship Ratio (vi). Debt-Equity Ratio
(a). Fixed assets to proprietor’s equity (vii). Stock to Current Assets Ratio
(b). Current assets to proprietor’s equity (viii). Stock to Working Capital Ratio
(ix). Current Assets to Working Capital Ratio (x). Current Assets to Liquid Assets
Ratio
(xi). All Long-Term funds to Working (xii). Tangible Assets to Working
Capital Ratio Capital Ratio
(xiii). Capital Gearing Ratio
Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 15
Answer (6):
(i). Current Ratio
Here, Current Assets = Stock + Debtors + Cash
= 1,50,000 + 50,000 + 1,00,000 = 3,00,000
and, Current Liabilities = Creditors + Bank Overdraft
= 1,00,000 + 50,000 = 1,50,000
Current Assets 3,00,000
 Current Ratio = =  2 1
Current Liabilities 1,50,000
(ii). Liquid Ratio
Here, Liquid Assets = Debtors + Cash = 50,000 + 1,00,000 = 1,50,000
and, Liquid Liabilities = Creditors = 1,00,000
Liquid Assets 1,50,000
 Liquid Ratio = =  1.5  1
Liquid Liabilities 1,00,000
(iii). Absolute Liquid Ratio
Absolute Liquid Assets Cash (Assets)
Absolute Liquid Ratio = 
Absolute Liquid Liabilities Cash (Liabilities)
1,00,000
 Absolute Liquid Ratio =  1:1
1,00,000
(iv). Proprietory Ratio
Here, Proprietor's Equity = Equity Share Capital + 10% Preference Share
+ Reserve & Surplus
= 2,00,000  1,00,000  1,00,000  4,00,000
and, Total Assets = 7,00,000
Proprietor's Equity 4,00,000
 Proprietory Ratio = = = 0.57 : 1
Total Assets 7,00,000
(v). Assets-Proprietorship Ratio
Fixed Assets
(a). Fixed Assets to Proprietor’s Equity =
Proprietor's Equity
Fixed Assets = Plant & Machinery + Land & Buildings
 Fixed Assets = 2,00,000 + 2,00,000 = 4,00,000
Proprietor's Equity = 4,00,000
4,00,000
 Fixed Assets to Proprietor’s Equity =  1:1
4,00,000

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 16


Current Assets
(b). Current Assets to Proprietor’s Equity =
Proprietor's Equity
3,00,000
 Current Assets to Proprietor’s Equity =  0.75 :1
4,00,000

(vi). Debt Equity Ratio


Total Debts
Debt-Equity Ratio =
Proprietor's Equity
Here, Total Debts = 20% Debenture + Long term Loan + Current Liabilities
 Total Debts = 1,00,000 + 50,000 + 1,50,000 = 3,00,000
3,00,000
 Debt-Equity Ratio =  0.75 :1
4,00,000
(vii). Stock to Current Assets Ratio
Stock 1,50,000
Stock to Current Assets Ratio =   0.5 :1
Current Assets 3,00,000
(viii). Stock to Working Capital Ratio
Stock 1,50,000
Stock to Working Capital Ratio =   1:1
Working Capital 1,50,000
(ix). Current Assets to Working Capital Ratio
Here, Working Capital  Current Assets - Current Liabilities
= 3,00,000 - 1,50,000 = 1,50,000
Current Assets 3,00,000
 Current Assets to Working Capital Ratio =   2 :1
Working Capital 1,50,000
(x). Current Assets to Liquid Asset Ratio
Current Assets 3,00,000
Current Assets to Liquid Asset Ratio =   2 :1
Liquid Asset 1,50,000
(xi). All Long-term Funds to Working Capital Ratio
Here, All Long-term Funds  10% Preference share capital + 20% Debenture
+ Long Term Loan
= 1,00,000 + 1,00,0001 + 50,000 = 2,50,000
All Long-term Funds
 All Long-term Funds to Working Capital Ratio =
Working Capital
2,50,000
  1.67 :1
1,50,000

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 17


(xii). Tangible Assets to Working Capital Ratio
Here, Tangible Assets = Fixed Assets = 4,00,000
Tangible Assets 4,00,000
Tangible Assets to Working Capital Ratio =   2.67:1
Working Capital 1,50,000
(xiii). Capital Gearing Ratio
Preferred Shares + Debenture
Capital Gearing Ratio =
Equity Share Capital
1,00,000 + 1,00,000 2,00,000
   1:1
2,00,000 2,00,000


Question # 7
 Calculate the important ratios which you think significant in analyzing the financial trend
of the business :—
2003 2004
(Taka) (Taka)
Cash 15,380 29,020
Accounts Receivable 11,260 11,710
Inventories 56,160 49,460
Fixed Assets 2,17,200 2,19,810
3,00,000 3,00,000
Accounts Payable 20,000 18,000
Notes Payable 12,750 7,500
Debentures 1,00,000 1,00,000
Retained Earnings 67,250 84,500
Capital Stock 1,00,000 1,00,000
3,00,000 3,00,000
Sales 1,80,000 2,00,000
Answer (7):
(i). Current Ratio

Current Assets Cash + Accounts Receivables + Inventories


Current Ratio = =
Current Liabilities Accounts Payable + Notes Payable
For 2003 For 2004
Current =
15,380 + 11,260 + 56,160
=
29,020 + 11,710 + 49,460
Ratio 20,000 + 12,750 18,000 + 7,500
82,800 90,190
=  2.53 : 1   3.54 : 1
32,750 25,500

Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 18


(ii). Liquid Ratio
Liquid Assets Cash + Accounts Receivables
Liquid Ratio = =
Current Liabilities Accounts Payable + Notes Payable
For 2003 For 2004
Liquid =
15,380 + 11,260
=
29,020 + 11,710
Ratio 20,000 + 12,750 18,000 + 7,500
26,640 40,730
=  0.81 : 1   1.60 : 1
32,750 25,500

(iii). Debt. Equity Ratio


Total Liabilities Accounts Payable + Notes Payable + Debentures
Debt. Equity Ratio = =
Equity Funds Retained Earnings + Capital Stock
For 2003 For 2004
Debt. =
20,000 + 12,750 + 1,00,000
=
18,000 + 7,500 + 1,00,000
Equity 67,250 + 1,00,000 84,500 + 1,00,000
Ratio 1,32,750 1,25,500
=  0.79 : 1 =  0.68 : 1
1,67,250 1,84,500

(iv). Debtors Turnover Ratio


Sales Sales
Debtors Turnover Ratio = =
Debtors Accounts Receivable
For 2003 For 2004
Debtors =
1,80,000
=
2,00,000
Turnover 11,260 11,710
Ratio  16 times (appx.)  17.08 times (appx.)

Comments :
On the basis of the above ratios, the financial trend of the business is increasing
gradually.



Md. Anisur Rahman (Parvej), SO (IT), ICTD, BDBL 19