EVERLIGHT COMPANY LIMITED
Comparative Balance Sheet
December 31, Year 1 and Year 2

Year 1

Year2

Assets

Rs.

Rs.

Cash

1,000

1,200

Bank

6,000

7,500

Accounts Receivable

12,600

14,800

Inventory

18,400

20,500

Repayments

800

850

Land and Building

20,000

24,000



December 31st
Plant and Machinery

30,000


32,000



88,800


1,00,850


Liabilities and Shareholders' Equity

4,000


7,850


Bills Payable





Accounts Payable

6,400


6,000


Other Current Liabilities

2,000


2,200


Debentures (10%)

20,000


18,000


Preference Shares (12%)

10,000


10,000


Ordinary Shares. Rs. 10 each

40,000


50,000


Retained Earnings

6,400


6,800



88,800


1,00,850


Income and Retained Earnings Statement of the Year Ending December 31, Year 2
Sales Revenue
Less Expenses:

Rs. 28,000

Rs. 60,000

Cost of Goods Sold



Selling

8,000


Administrative

6,000


Interest

2,000


Income Tax

6,400


Total Expenses


50,400

Net Income


9,600

Less Dividend : Preferred

1,200


Ordinary

8,000




9,200

Increase in Retained Earning for Year 2


400

Retained Earnings, December 31, Year 1


6,400

Retained Earnings, December 31, Year 2


6,800

Along with the above information, here we compute the subsequent ratios
1) Rate of Return on Assets
2) Profit Margin (before interest and related tax effect)
3) Cost of Goods Sold to Sales Percentage
4) Selling Expenses to Sales Percentage
5) Operating Expense Ratio
6) Total Assets Turnover
7) Accounts Receivable Turnover
8) Inventory Turnover
9) Rate of Return on Ordinary Share Equity
10) Current Ratio
11) Quick Ratio
12) LongTerm Debt Ratio
13) Debt Equity Ratio
14) Times interest Charges Earned
15) Earnings per (Ordinary) Share
16) Price Earnings Ratio
17) Book Value per Ordinary Share
The income tax price is 40 percent. The market price of an ordinary share in the ending of Year 2 was as Rs. 14.80.
Here we take all such ratios individually.
1) Rate of Return on Assets
= (Rs. 9,600 + (1 .40) (Rs. 2, 000))/( .5 (Rs. 88,800 + Rs.1,00,850))
= 11.39 percent
2) Profit Margin (before interest and related tax effect)
= (Rs. 9,600 + (140) (Rs. 2,000))/ Rs. 60,000
= 18 percent
3) Cost of Goods Sold to Sales Percentage
= Rs. 28,000/ Rs. 60,000
= 46.67 percent
4) Selling expenses to Sales Percentage
= Rs. 8,000/ Rs. 60,000
= 13.33 percent
5) Operating Expense Ratio
= (Rs. 8,000+ Rs. 6,000)/ Rs. 60,000
= 23.33 percent
6) Total Asset Turnover
= Rs. 60,000 / (.5 (Rs. 88,800 + Rs.1,00,850))
= .63 times per year
7) Accounts Receivable Turnover
= Rs. 60,000 / (.5 (Rs. 12,600 + Rs. 1,4,800))
= 4.3 8 times per year
8) Inventory Turnover Ratio
= Rs.28,000 /.5 (Rs. 18,400 + Rs. 20,500)
= 1.44 times per year
9) Rate of Return or Ordinary Share Equity
= (Rs. 9,600  Rs. 1,200 x 100)/ .5 (Rs. 46,400 + Rs. 56,800)
= 16.28 per cent
10) Current Ratio
December 31, Year 1 : Rs.38,800/ Rs.12,400
= 3.13:1
December 31, Year 2 : Rs. 44,850/ Rs.16,050
= 2.79 : 1
11) Quick Ratio:
December 31, Year 1 : Rs.19,600/ Rs.12,400
= 1.56 :1
December 31, Year 2: Rs.23500/ Rs.16,050
= 1.46 :1
12) Longterm Debt Ratio
December 31, Year 1: Rs.20,000/ Rs. 80,400
= 24.86 percent
December 31, Year 2: Rs. 18,000/ Rs. 84,800
= 21.23 percent
13) Debt Equity Ratio
December31, Year 1 : Rs.20,000/ Rs.46,400
= 43.1
December 31, Year 2 : Rs.18,000/ Rs. 56,800
= 31.69
(Equity might or not comprise retained earnings. Now, retained earnings have been comprised)
14) Times Interest Charges Earned
(Rs. 9,600 + Rs. 6,400 + Rs: 2,000)/ Rs: 2,000
= 9 times
15) Earnings per Ordinary Share (EPS)
December 31 Year 2:
= Rs. 8,40 0/.5 (4000 + 5000)
= Rs.1.87
16) PriceEarnings Ratio
December 31, Year 2 as:
= 14.80 /1.87
= 7.91 times
17) Book Value per Ordinary Share
December 31, Year 1 : = Rs. 46,400/4,000
= Rs.11.60
December 31, Year 2 : = Rs. 56,800/5,000
= Rs.11.36