Question

prepare balance sheet of Zebra
Ltd. Show all workings. 14 marks
(i) Current Ratio 2.5
(ii) Liquid Ratio 1.5
(iii) Proprietary Ratio 0.75
(iv) Working Capital shs 60,000
(v) Reserves and surplus shs 40,000
(vi) Bank overdraft shs 10,000
There are no long term loan or fixed assets.
(b) From the information given below calculate the amount of fixed assets and Proprietor’s
Fund. 5 marks
Ratio of fixed assets to proprietors fund = 0.75
Net working capital = shs 600,000
c) What are the common forms of off balance sheet arrangements that are an important concern for investors in regard to assessing a company's financial health? 6 marks

Answer 1

Answer:

i) a current ratio of 2.5. This means its total assets would pay off its liabilities 2.5 times.

ii) Quick Ratio = Quick Assets/Current Liabilities. 1.5 = Quick Assets/1,00,000. Quick Assets = ₹ 1,50,000

iii) Proprietary ratio = 3,00,000 / 4,00,000 = 0.75 times. or 75% meaning hereby that 25% of the funds have been supplied by the outside creditors.

iv)  Working capital = (Current Assets - Current Liabilities) Or, Rs.2,40,000 = k (2.5 - 1) = 1.5 k Or, k = Rs.1,60,000

v) Reserves & Surplus = Rs.9,60,000 - Rs.1,60,000 = Rs.8,00,000 Sundry payables (creditors) = (Current liabilities - Bank overdraft)