Solution for Q 61 to 70 of Chapter 4 of Book 3 - Analysis of Financial Statements of T S Grewal Class 12 Accountancy 2026-27 are given below. The Chapter name is Ratio Analysis class 12. These Solutions are based on topics solvency ratios which includes proprietary ratio, debt to equity ratio, total assets to debt ratio, interest coverag ratio.
Working notes are given with each solution. These help in understanding the steps and are also important for board exams as marks are given for steps.Debt equity ratio is a key ratio is finfing the long term solvency of any business and is critical business health parameter. A higher debt equity ratio is generally considered unhealthy for business as it indicates higher dependency on external funds and future solvency problems may arise.
These solutions are also useful for CA Foundation, CS Foundation and CMA Foundation students. The solutions will be helpful for students as well as teachers teaching class 12 accounts.
Question 61
| Step 1 |
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| Shareholders Funds |
= |
Share Capital |
+ |
Reserves and Surplus |
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450000 |
+ |
75000 |
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= |
525000 |
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| Step 2 |
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| Total Assets |
= |
Fixed Assets |
+ |
Short Term Investments |
+ |
Other Current |
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Assets |
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375000 |
+ |
225000 |
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+ |
150000 |
| |
= |
750000 |
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| Step 3 |
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| Proprietary Ratio |
= |
Shareholders Funds |
/ |
Total Assets |
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525000 |
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750000 |
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= |
0.7:1 |
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▶ Video Solution: Coming Soon
Question 62
| Step 1 |
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| Total Assets |
= |
Total Assets |
/ |
Long Term Debt |
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| to Debt Ratio |
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| 2 |
= |
Total Assets |
/ |
500000 |
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| Total Assets |
= |
Total Assets |
X |
Long Term Debt |
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to Debt Ratio |
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2 |
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X |
500000 |
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= |
1000000 |
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| Step 2 |
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| Equity Share capital |
= |
Debt |
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X |
0.5 |
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500000 |
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X |
0.5 |
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= |
250000 |
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| Step 3 |
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| Preference Share |
= |
Equity Share |
X |
25% |
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| capital |
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Capital |
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250000 |
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X |
25/100 |
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= |
62500 |
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| Step 4 |
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| Net Profit after Tax |
= |
Net Profit Before Tax |
- |
Tax |
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1000000 |
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- |
400000 |
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= |
600000 |
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| Step 5 |
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| Shareholder Funds |
= |
Equity |
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+ |
Preference |
+ |
Net Profit |
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Share Capital |
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share capital |
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after tax |
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250000 |
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+ |
62500 |
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+ |
600000 |
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= |
912500 |
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| Step 6 |
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| Proprietary Ratio |
= |
Shareholders Funds |
/ |
Total Assets |
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912500 |
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1000000 |
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= |
0.91:1 |
or |
91.20% |
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▶ Video Solution: Coming Soon
Question 63
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We assume the ratio to be 8:10 |
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Each transaction will be assumed to be of Rs 1 |
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Journal entries are shown here for understanding the transaction and its impact |
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| (i) |
Journal Entry |
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Bank A/c Dr.. |
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To Loan from SBI A/c |
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Proprietary Ratio |
8 : 11 |
= |
0.73:1 |
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Proprietary Ratio |
Decrease |
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| (ii) |
Journal Entry |
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Machinery A/c Dr.. |
1 |
Total Assets |
Increase |
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To Bank A/c |
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1 |
Total Assets |
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Decrease |
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| Proprietary Ratio |
No Impact |
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| (iii) |
Journal Entry |
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7% Preference Shares A/c Dr.. |
1 |
Shareholder's Funds |
Decrease |
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To Bank A/c |
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1 |
Total Assets |
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Decrease |
| Proprietary Ratio |
7 : 9 |
= |
0.78:1 |
| Proprietary Ratio |
Decrease |
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| (iv) |
Journal Entry |
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Building A/c Dr.. |
1 |
Total Assets |
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To Equity Share Capital A/c |
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1 |
Shareholder's Funds |
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| Proprietary Ratio |
9 : 11 |
= |
0.82:1 |
| Proprietary Ratio |
Increase |
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| (v) |
Journal Entry |
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10% Debentures A/c Dr.. |
CL |
Decrease |
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To Bank A/c |
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TA |
Decrease |
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| Proprietary Ratio |
8 : 9 |
= |
0.89:1 |
| Proprietary Ratio |
Increase |
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| Note : The debentures were redeemed in current year. |
| It means these were payable within 12 months. |
| Hence debentures are shown under Current Liabilities |
▶ Video Solution: Coming Soon
Question 64
| Step 1 |
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| Total Assets |
= |
Non Current |
+ |
Current Assets |
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Assets |
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4000000 |
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+ |
4000000 |
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= |
8000000 |
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| Step 2 |
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| Long term Debt |
= |
Long Term |
+ |
Long term Provisions |
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Borrowings |
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1500000 |
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+ |
2500000 |
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= |
4000000 |
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| Step 3 |
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| Total Liabilities |
= |
Total Assets |
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= |
8000000 |
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| Step 4 |
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| Shareholder Funds |
= |
Total Liabilities |
- |
Current Liabilities |
- |
Long Term Debt |
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8000000 |
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- |
2000000 |
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- |
4000000 |
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= |
2000000 |
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| Step 5 |
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| Proprietary Ratio |
= |
Shareholders |
/ |
Total Assets |
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Funds |
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2000000 |
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8000000 |
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= |
0.25:1 |
or |
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25% |
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| Step 6 |
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| Debt to Equity Ratio |
= |
Debt |
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/ |
Equity |
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4000000 |
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/ |
2000000 |
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= |
2:1 |
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| Step 7 |
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| Total Assets |
= |
Total Assets |
/ |
Long Term Debts |
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| to Debt Ratio |
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8000000 |
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/ |
4000000 |
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= |
2:1 |
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▶ Video Solution: Coming Soon
Question 65
| Step 1 |
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| Working Capital |
= |
Current Assets |
- |
Current Liabilities |
| So |
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| Current Liabilities |
= |
Current Assets |
- |
Working Capital |
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|
750000 |
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- |
150000 |
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= |
600000 |
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| Step 2 |
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| Long Term Debt |
= |
Total Debt |
- |
Current Liabilities |
| |
|
1800000 |
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- |
600000 |
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= |
1200000 |
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| Step 3 |
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| Shareholder Funds |
= |
Capital Employed |
- |
Long term Debt |
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1500000 |
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- |
1200000 |
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= |
300000 |
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| Step 4 |
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| Total Liabilities |
= |
Shareholder Funds |
+ |
Total Debt |
| |
|
300000 |
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+ |
1800000 |
| |
= |
2100000 |
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| Alternately |
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| Total Liabilities |
= |
Capital Employed |
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+ |
Current Liabilities |
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|
1500000 |
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+ |
600000 |
| |
= |
2100000 |
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| Step 5 |
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| Total Assets |
= |
Total Liabilities |
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|
2100000 |
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| Step 6 |
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| Proprietary Ratio |
= |
Shareholders Funds |
/ |
Total Assets |
| |
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300000 |
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2100000 |
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= |
0.14:1 |
or |
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14.29% |
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| Step 7 |
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| Debt to Equity |
= |
Debt |
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/ |
Equity |
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| Ratio |
|
1200000 |
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/ |
300000 |
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= |
4:1 |
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| Step 8 |
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| Total Assets |
= |
Total Assets |
/ |
Long Term Debts |
| |
|
2100000 |
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/ |
1200000 |
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= |
1.75:1 |
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▶ Video Solution: Coming Soon
Question 66
| Interest Coverage |
= |
Net Profit before |
/ |
Interest on Long term debt |
| Ratio |
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Interest and tax |
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| |
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1000000 |
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/ |
200000 |
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= |
5 |
Times |
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▶ Video Solution: Coming Soon
Question 67
| Net Profit before |
= |
Net profit after tax |
+ |
Tax |
+ |
Interest |
| Interest and tax |
425000 |
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+ |
75000 |
+ |
125000 |
| |
= |
625000 |
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| Interest Coverage |
= |
Net Profit before |
/ |
Interest on Long |
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| Ratio |
|
Interest and tax |
|
term debt |
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| |
|
625000 |
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/ |
125000 |
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= |
5 |
Times |
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▶ Video Solution: Coming Soon
Question 68
| Step 1 |
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| Net profit after Tax |
= |
120000 |
| Tax rate |
= |
40% |
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| Net profit before |
= |
100 / 60 X 120000 |
| Tax |
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| |
= |
200000 |
| |
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| Note : (If Rs 100 Profit before tax then Rs 60 profit after tax) |
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| (Now Keep profit before tax as numerator as it is not known) |
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| Step 2 |
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| Interest on Long |
= |
Interest on |
+ |
Interest on |
| term debt (As below) |
Debentures |
|
Mortgage Loan |
| |
|
15000 |
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+ |
12000 |
| |
= |
27000 |
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| Interest on |
= |
15% Debentures |
X |
Interest Rate |
| Debentures |
100000 |
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X |
15% |
| |
= |
15000 |
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| Interest on |
= |
12% Mortgage Loan |
X |
Interest Rate |
| Mortgage Loan |
100000 |
|
X |
12% |
| |
= |
12000 |
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| Step 3 |
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| Net Profit before |
= |
Net profit before Tax |
+ |
Interest on Long term debt |
| Interest and tax |
200000 |
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+ |
27000 |
| |
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(15000+12000) |
| |
= |
227000 |
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| Step 4 |
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| Interest Coverage |
= |
Net Profit before |
/ |
Interest on Long |
| Ratio |
|
Interest and tax |
|
term debt |
| |
|
227000 |
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27000 |
| |
= |
8.41 |
Times |
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|
▶ Video Solution: Coming Soon
Question 69
| Step 1 |
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| Net profit after Tax |
= |
630000 |
| Tax rate |
= |
30% |
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| Net profit before |
= |
100 / 70 X 630000 |
| Tax |
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| |
= |
900000 |
| |
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| Note : (If Rs 100 Profit before tax then Rs 70 profit after tax) |
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| (Now Keep profit before tax as numerator as it is not known) |
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| Step 2 |
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| Interest on |
= |
15% Debentures |
X |
Interest Rate |
| Debentures |
2000000 |
|
X |
15% |
| |
= |
300000 |
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| |
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| Step 3 |
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| Net Profit before |
= |
Net profit before Tax |
+ |
Interest on Long term debt |
| Interest and tax |
900000 |
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+ |
300000 |
| |
= |
1200000 |
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| |
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| Step 4 |
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| Interest Coverage |
= |
Net Profit before |
/ |
Interest on Long |
| Ratio |
|
Interest and tax |
|
term debt |
| |
|
1200000 |
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/ |
300000 |
| |
= |
4 |
Times |
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|
▶ Video Solution: Coming Soon
Question 70
| Step 1 |
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| Net profit |
= |
Net profit after Tax |
+ |
Tax |
| before tax |
75000 |
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+ |
9000 |
| |
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| |
= |
84000 |
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| |
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| Step 2 |
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| Interest on |
= |
Interest on |
+ |
Interest on Long |
| Long term debt |
Debentures |
|
term Loan |
| (As below) |
5000 |
|
+ |
5000 |
| |
= |
10000 |
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| |
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| Interest on |
= |
10% Debentures |
X |
Interest Rate |
| Debentures |
50000 |
|
X |
10% |
| |
= |
5000 |
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| |
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| Interest on |
= |
5000 |
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|
| Long Term Loan |
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| |
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| Step 3 |
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| Net Profit before |
= |
Net profit before Tax |
+ |
Interest on Long term debt |
| Interest and tax |
84000 |
|
+ |
10000 |
| |
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| |
= |
94000 |
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| |
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| Step 4 |
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| Interest |
= |
Net Profit before |
/ |
Interest on Long |
| Coverage Ratio |
Interest and tax |
|
term debt |
| |
|
94000 |
|
/ |
10000 |
| |
= |
9.4 |
Times |
|
|
▶ Video Solution: Coming Soon
