Скачать или смотреть Calculation of Proprietary Ratio- By Jitender Kumar

Calculation of Proprietary Ratio- By Jitender Kumar { M.Com. , M.Phil. , C.M.A.(Inter) , C.S.(Inter) , P.G.D.B.A. , P.G.D.F.M. , U.G.C.N.E.T. Qualified }
This is a channel for Financial Accounting, Corporate Accounting, Cost Accounting, Management Accounting and Financial Management.
Brief description about Mr. Jitender Kumar
Mr. Jitender Kumar is a graduate in commerce from Delhi University. He holds M.Com. and M.Phil degrees from Madurai Kamaraj University. He has also obtained Post Graduate Diploma in Financial Management and Post Graduate Diploma in Business Administration from Annamalai University. He qualified Cost and Management Accounting (C.M.A.)(Inter) in his first attempt and obtained All India Rank 48. He also qualified C.S.(Executive) in his first attempt securing first division. He qualified U.G.C.N.E.T. in June 2012 with a total of 75% marks. Besides this, he holds many certifications from National Stock Exchange(N.S.E.).
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1. What does a high operating ratio indicate?
Ans. High operating ratio indicates higher operating cost of the business & thus lower operating profits are available to the firm.

2. A Ltd. and B Ltd. are two companies operating in the same field and having STR of 4 times and 5 times respectively. Which company is having a better STR?
Ans. STR of B Ltd. is better than the STR of A Ltd. since higher STR indicates efficient performance i.e. stock is being converted into sales quickly.

3. Give any two ratios judging the efficiency of a concern.
Ans. STR and DTR.

4. What do you understand by Accounting Ratio?
Ans. Accounting Ratio may be defined as a mathematical expression of the relationship between two items or group of items shown in the Financial Statements.

5. State any two limitations of Ratio Analysis.
Ans. (i) Qualitative factors are ignored.
(ii) Price level changes are not reflected.

6. State the limitation of ratio analysis regarding qualitative aspect.
Ans. As ratio are arithmetical expression, qualitative aspect cannot be presented through ratios. Therefore, in making decision with the help of ratio, almost care should be taken, as ratio is only one-sided approach to measure the efficiency of the business.

7. Name the ratios that indicate the liquidity of an enterprise.
Ans. Current Ratio and Liquid Ratio.

8. What is the ideal Current Ratio and Quick Ratio?
Ans. Ideal Current Ratio 2:1, Ideal Quick Ratio 1:1

9. How the solvency of a business is assessed by ‘Financial Statement Analysis’?
Ans. Through solvency Ratios, the solvency of a business is assessed by ‘Financial Statement Analysis’.

10. What does a low Debtors’ Turnover Ratio indicate?
Ans. It may be an indication of long credit period or slow realisation from debtors.

11. What does a low working Capital Turnover Ratio indicate?
Ans. It is an indication of inefficiency of working capital management.

12. How the ‘Earning Capacity of a business’ is assessed by ‘Financial Statement Analysis’?
Ans. On the basis of ‘Profitability Ratios’ earning capacity of a business is assessed.

13. What will be the Operating Profit Ratio, if Operating Ratio is 82.95%?
Ans. Operating Profit Ratio = 100- Operating Ratio
= 100- 82.59 = 17.41%.

14. The gross Profit Ratio of a company is 50%. State with reason whether the decrease in rent received by Rs.15,000 will increase, decrease or not change the ratio.
Ans. Decrease in rent received by Rs.15,000 will not change the Gross Profit Ratio because rent received neither effects the gross profit nor the net sales.

15. X Ltd. has a Debt Equity Ratio at 3:1. According to the management, it should be maintained at 1:1. What are the two choices to do so?
Ans. The two choices to maintain Debt Equity Ratio at 1:1 are-
a) To increase the Equity
b) To reduce the debt.

16. You are a Debenture holder of a reputed company. Mention any two ratios that you will compute to examine whether your decision was justified.
Ans. (i) Debt Equity Ratio (ii) Interest Coverage Ratio.

17. What does a higher inventory turnover ratio indicates?
Ans. A higher inventory turnover ratio indicates that finished inventory is rapidly turning into sales.