Following information is given for Prashuk Ltd.: Fixed assets turnover ratio (Based on cost of sales) 8 times Capital turnover ratio (Based on cost…

CA Intermediate · Financial Management and Strategic Management · MTP · January 2026
Following information is given for Prashuk Ltd.: Fixed assets turnover ratio (Based on cost of sales) 8 times Capital turnover ratio (Based on cost of sales) 2 times Inventory Turnover 8 times Receivable turnover 4 times Payable turnover 6 times GP Ratio 25% Gross profit during the year amounts to 8,00,000. There is no long-term loan or overdraft. Reserve and surplus amount to 2,00,000. Ending inventory of the year is 20,000 above the beginning inventory. Based on the above information, DETERMINE the various assets and liabilities of the company.

Suggested Answer and Working Notes:

(a) G.P. ratio = Gross Profit / Sales = 25% Sales = Gross Profit / 25 * 100 = 8,00,000 / 25 * 100 = 32,00,000 (b) Cost of Sales = Sales - Gross profit = 32,00,000 -8,00,000 = 24,00,000 (c) Receivable turnover = Sales / Debtors = 4 Debtors = Sales / 4 = 32,00,000 / 4 = 8,00,000 (d) Fixed assets turnover = Cost of Sales / Fixed Assets = 8 Fixed assets = Cost of Sales / 8 = 24,00,000 / 8 = 3,00,000 (e) Inventory turnover = Cost of Sales / Average Stock = 8 Average Stock = Cost of Sales / 8 = 24,00,000 / 8 = 3,00,000 Average Stock = (Opening Stock + Closing Stock) / 2 Average Stock = (Opening Stock + Opening Stock + 20,000) / 2 Average Stock = Opening Stock + 10,000 Opening Stock = Average Stock -10,000 = 3,00,000 -10,000 = 2,90,000 Closing Stock = Opening Stock + 20,000 = 2,90,000 +20,000 = 3,10,000 (f) Payable turnover = Purchase / Creditors = 6 Purchases = Cost of Sales + Increase in Stock = 24,00,000 +20,000 = 24,20,000 Creditors = Purchase / 6 = 24,20,000 / 6 = 4,03,333 (g) Capital turnover = Cost of Sales / Capital Employed = 2 Capital Employed = Cost of Sales / 2 = 24,00,000 / 2 = 12,00,000 (h) Capital = Capital Employed – Reserves & Surplus = 12,00,000 - 2,00,000 = 10,00,000 Balance Sheet of T Ltd as on...... Liabilities Amount (₹) Assets Amount (₹) Capital 10,00,000 Fixed Assets 3,00,000 Reserve & Surplus 2,00,000 Stock 3,10,000 Creditors 4,03,333 Debtors 8,00,000 Other Current Assets 1,93,333 16,03,333 16,03,333

Topics: Part-A: Financial Management

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