Theme Ltd provides you the following information: Particulars ₹ 12.5% Debt 45,00,000 Debt to Equity ratio 1.5:1 Return on Shareholder's fund 54%…

Working Notes: Debt = 45,00,000 Interest = 45,00,000 x 12.5% = 5,62,500 Debt to Equity = 1.5:1 = Total Debt Shareholders' Equity Equity = 30,00,000 Return of Shareholder's funds = 54% = Net Profit after taxes Equity shareholders' fund x 100 Profit after tax (PAT) = 54% x Equity = 16,20,000 Profit before tax (PBT) (1-25%) = Profit after tax = 16,20,000/75% = 21,60,000 Earning before interest and tax (EBIT) = PBT + Interest = 21,60,000 +5,62,500 = 27,22,500 (i) Interest Coverage Ratio = EBIT/Interest = 27,22,500/5,62,500 = 4.84 Times (ii) Operating Profit Ratio = 1 - Operating Ratio = 1 - 0.85 = 0.15 or 15% 0.15 = Operating Profit Sales x 100 Sales = EBIT or Operating Profit /0.15 = 27,22,500 / 0.15 = 1,81,50,000 Operating ratio = Operating expenses Cost of goods sold (COGS) = 2 : 6 = 1:3 Operating expenses = 1/3 COGS Operating cost = Sales - Operating profit = 1,81,50,000 -27,22,500 = 1,54,27,500 1,54,27,500 = COGS + Operating expenses 1,54,27,500 = COGS + 1/3 COGS COGS = 1,15,70,625 Gross profit = Sales - COGS = 1,81,50,000 – 1,15,70,625 = 65,79,375 Gross Profit ratio = Gross Profit Sales x 100 = 65,79,375/1,81,50,000 = 0.3625 or 36.25% Gross profit and sales can be calculated in alternative way also. However, there will be no change in GP ratio i.e 36.25% (iii) Current Ratio Current Ratio = Current Assets Current Liabilities = 1.8 Current Assets = 1.8 Current Liabilities Total of Balance sheet liability = Equity + Debt + Current Liabilities =30,00,000+45,00,000+CL .....(2) Total Balance sheet asset = Fixed Assets + Current Assets = 39 lakhs + CA = 39 + 1.8CL.......(3) Equating 2 and 3, 75,00,000 + CL = 39,00,000 + 1.8CL 0.8CL = 36,00,000 CL = 45,00,000 Current Assets = 1.8 CL = 1.8 x 45 lakhs = 81,00,000