Page 62 - DCOM302_MANAGEMENT_ACCOUNTING

Unit 4: Ratio Analysis

(g) Solvency ratio = Total assets/Total liabilities Notes

Total assets = Total of asset side of balance sheet.
Total liabilities = Both long-term and current liabilities.
= 1,60,00,000/1,00,00,000 = 1.6

2. Yahoo Ltd. has the following profit & loss account for the year ended 31st March, 2007 and
the balance sheet as on that date.
Profit & Loss Account for the year ended 31st March, 2007

(` in Lakhs)
Particulars ` Particulars `
Openings stock 1.75 Sales: Credit 12.00
Add: Manufacturing cost 10.75 Cash 3.00
12.50
Less: Closing stock 1.50
Cost of goods sold 11.00
Gross Profi t 4.00
15.00 15.00
Administrative expenses 0.35 Gross profi t 4.00
Selling expenses 0.25 Other income 0.09
Depreciation 0.50
Interest 0.47
Income-tax 1.26
Net profi t 1.26
4.09 4.09

Balance Sheet as on 31st March, 2007
(` in Lakhs)
Liabilities ` Assets `
Equity shares of ` 10 each 3.50 Plant & machinery 10.00
10% Preference shares 2.00 Less: Depreciation 2.50
Reserves and surplus 2.00 Net plant & machinery 7.50
Long-term loan (12%) 1.00 Goodwill 1.40
Debentures (14%) 2.50 Stock debtors 1.50
Creditors 0.60 Pre-paid expenses 1.00
Bills payable 0.20 0.25
Accured expenses 0.20 Marketable securities 0.75
Provision for tax 0.65 Cash 0.25
12.65 12.65
The market price of the share of Yahoo Ltd. on 31st March, 2007 is ` 45.
(` Lakhs)
Reserves at the beginning 1.465
Net profit during the year 1.260

2.725
Preference dividends 0.200
Contd…

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