Hi,
Can anyone hlep me with this problem in Financial Mgmt.
XYZ Ltd has a current ratio of 1.75 accompanied with a liquid ratio of 1.25. It works on a 20% gross margin and has affected sales of Rs.15 lakhs in the year ending March 2004. Other details on closing day are as follows
Stock Turnover Ratio (Closing st) 6 times
Debt Collection period 2 months
Reserve to Capital Ratio 0.6
Fixed asset turnover ratio
(on cost of goods sold) 1.2
Capital Gearing Ratio 0.0625
Fixed Asset to Networth 1.25
You are required to prepare the balance sheet as on 31st March 2004
Any help will be highly appreciated. Tks.
Pls also let me know which text I should follow for Fin Mgmt.
Tks again.
Lucy
Seems you are in Pe2 . hence you can refer Khan and Jains Book which is good
As regards your solution:
I have Partly worked out your solution I am not giving complete solution because I am not sure after a certain point
Solution:
See The trick is Start from the figure which is given in this case sales is given
Hence we now proceed as follows
Sales 15 lakhs and GP ratio is 20%
This Cost of Goods sold is Rs 12 Lakhs (80%)
Stock Turnover Ratio:
Formula is Cost of Goods Sold/Avg Inventory
Since Closing Stock is specified in brackets
Modified Formula is
CGS/Cl Stock
Thus 6 times = 12lakhs/cl stock
Thus Closing Stock is 2 lakhs
Debtor Turnover ratio
Formula is
Net Credit Sales/Avg Debtors
Assume all Sales are on Credit
2 months = 15 Lakhs/Avg Debtors
Thus Debtors is 7.5 Lakhs
Fixed Asset Turnover Ratio
CGS/Avg Fixed Assets
1.2 = 12 Lakhs/FA
Thus Fixed Assets = 10 Lakhs
Fixed Assets To networth Ratio
FA/Networth
1.25 = 10Lakhs/NetWorth
Net Worth = Rs 800000
Now Net Worth is Current Assets – Current Liabilities
0.75 = 1.75 – 1.00
(Current Ratio is 1.75 this means Current Liabilities is 1.00)
I feel I am 100% right upto here.
Now i am not sure after this . I will work it out when I am free. Thanks for reading
CAclubindia
