Question

Current ratio 2.5
Liquidity ratio 1.5
Net working capital ` 3,00,000
Fixed assets turnover ratio (on cost of sales) 2 times
Average debt collection period 2 months
Stock turnover ratio (cost of sales/closing stock) 6 times
Gross profit ratio 20%
Fixed assets/shareholders net worth 0.80
Reserve and surplus/capital 0.50
Draw up the balance sheet of the company XYZ Ltd.

Answer 1

ignore the handwriting

Answer 2

 We are required to draw up the Balance Sheet of XYZ Ltd. Given under is the balance sheet of the company:

                                 BALANCE SHEET OF XYZ LIMITED

LIABILITIES                                                          ASSETS

Share Capital                    $5,00,000$        Fixed Asset     $6,00,000$

Reserves & Surplus          $2,50,000$         Stock              $2,00,000$

Long-term borrowings      $1,50,000$        Debtors           $2,50,000$

Current Liabilities              $2,00,000$        Bank                  $50,000$

                                      -------------------                            -----------------

                                         $11,00,000$                                  $11,00,000$          

                                       --------------------                             -----------------

Working  Notes

• Let us assume Current Liabilities as $1$.
• Current Assets are $2.5$.
• Therefore the working capital will be $1.5$ (Difference).
• Given that Working Capital is $3,00,000$.
• Current Assets will be $3,00,000$ × $\frac{2.5}{1.5}$ = $5,00,000$
• Current Liabilities is $5,00,000$ - $3,00,000$ = $2,00,000$.
• Liquidity Ratio is $1.5$.
• Liquid Assets = $2,00,000$ × $1.5$ = $3,00,000$
• Stock is Current Asset - Liquid Asset = $5,00,000$ - $3,00,000$                                                                                 = $2,00,000$

• Cost of Sales is $2,00,000$ × $6$ = $12,00,000$
• Sales = Cost of Sales + GP Ratio

                  = $12,00,000$ + $\frac{20}{100}$ × $12,00,000$

• Sales = $15,00,000$
• Fixed Asset = $\frac{12,00,000}{2} = 6,00,000$
• Debtors $= \frac{15,00,000}{6}$ $= 2,50,000$
• Networth is $6,00,000$ × $\frac{1}{0.8} = 7,50,000$
• Reserves and Surplus are $\frac{1}3}$ of net worth = $2,50,000$
• Share Capital = $7,50,000$ - $2,50,000$ = $5,00,000$

PROJECT CODE: #SPJ3