Question

The following Balance Sheet and other information, calculate following ratios:

(i) Debt-Equity Ratio (ii) Working Capital Turnover Ratio (iii) Trade Receivables Turnover Ratio

Balance Sheet as at March 31, 2017
Particulars	Note No.	Rs.
I. Equity and Liabilities:
1. Shareholders’ funds
a) Share capital		10,00,000
b) Reserves and surplus		9,00,000
2. Non-current Liabilities
a) Long-term borrowings		12,00,000
3. Current Liabilities
a) Trade payables		5,00,000
Total		36,00,000
II. Assets
1. Non-current Assets
a) Fixed assets
Tangible assets		18,00,000
2. Current Assets
a) Inventories		4,00,000
b) Trade Receivables		9,00,000
c) Cash and cash equivalents		5,00,000
Total		36,00,000

Additional Information: Revenue from Operations Rs. 18,00,000 Calculate:

i) Debt-Equity Ratio

ii) Working Capital Turnover Ratio

iii) Trade Receivables Turnover Ratio

(Debt-Equity Ratio 0.63:1; Working Capital Turnover Ratio 1.39 times; Trade Receivables Turnover Ratio 2 times)

Answer 1

1. Debt-Equity Ratio

Debt = Long Term Borrowings = Rs 12,00,0000

Equity = Share Capital + Reserve and Surplus

= 10,00,000 + 9,00,000

= Rs 19,00,000

2. Working Capital Turnover Ratio

Revenue from Operations = Rs 18, 00,000

Working Capital = Current Assets – Current Liabilities

= 18,00,000 – 5,00,000

= Rs 13,00,000

3. Trade Receivables Turnover Ratio

Net Credit Sales = Rs 18,00,000

Average Trade Receivables = Rs 9,00,000

Notes:
1. Revenue from Operations are assumed to be revenue generated from credit sales.

2. The amount of trade receivables given in the Balance Sheet is assumed to be Average Trade Receivables.