Ratio Calculation From Financial Statement

Ratio Calculation From Financial Statement

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

Exercise Problem1

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

You are required to find out:

a)      #Gross Profit Ratio

b)      #Net Profit Ratio

c)      #Operating Ratio

d)      Operating #Net Profit to Net Sales Ratio

a. GROSS FORFIT RATIO

= Gross profit ÷ #Sales × 100

= 50,000 ÷ 1,60,000 × 100

= 31.25 %

b. #NET PROFIT RATIO

= Net profit ÷ Sales × 100

= 28,000 ÷ 1,60,000 × 100

= 17.5 %

 c. OPERATING RATIO

= #Cost of goods 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 #accounting 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.

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 #solvency status of the firm
5. To determine the #progress of the firm
6. As a basis for #taxation and fiscal policy
7. To ensure the legality of #dividends

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