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Ratio Calculation From Financial Statement

Ratio Calculation From Financial Statement

Profit and Loss a/c of Beta Manufacturing Company for the year ended 31st March 2010.

Exercise Problem1

Kindly download this link to view the exercise. Given in pdf format.

You are required to find out:

a)     

b)     

c)     

d)      Operating

a. GROSS FORFIT RATIO

= Gross profit ÷ × 100

= 50,000 ÷ 1,60,000 × 100

= 31.25 %

b. RATIO

= Net profit ÷ Sales × 100

= 28,000 ÷ 1,60,000 × 100

= 17.5 %

 c. OPERATING RATIO

= sold + Operating expenses ÷ Sales × 100

Cost of goos sold = Sales – Gross profit

= 1,60,000 – 50,000

= Rs. 1,10,000

Operating expenses = 4,000 + 22,800 + 1,200 =  Rs. 28,000

Operating ratio = 1,10,000 + 28,000 ÷ 1,60,000 × 100

= 86.25 %

d. OPERATING NET PROFIT TO NET SALES RATIO

= Operating Profit ÷ Sales × 100

Operating profit = Net profit + Non-Operating expenses – Non operating income

= 28,000 + 800 – 4,800 =  Rs. 32,000

Operating Net Profit to Net Sales Ratio = 32,000 ÷ 1,60,000 × 100

= 20 %

What is a Financial statement?

It is an organised collection of data according to logical and consistent procedure. It combines statements of balance sheet, income and retained earnings. These are prepared for the purpose of presenting a periodical report on the program of investment status and the results achieved i.e., the balance sheet and P& L a/c.

financial-statement

Objectives of Financial Statement Analysis:

  1. To help in constructing future plans
  2. To gauge the earning capacity of the firm
  3. To assess the financial position and performance of the company
  4. To know the status of the firm
  5. To determine the of the firm
  6. As a basis for and fiscal policy
  7. To ensure the legality of

Financial Statement Analysis Tools 

Types of Financial Analysis

  1. Intra-Firm Comparison
  2. Inter-firm Comparison
  3. Industry Average or Standard  Analysis
  4. Horizontal Analysis
  5. Vertical Analysis

Limitations

  • Lack of Precision
  • Lack of Exactness
  • Incomplete Information
  • Interim Reports
  • Hiding of Real Position or Window Dressing
  • Lack of Comparability
  • Historical Costs

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