The profit and loss and balance sheet of Happy Ltd. is given below:
Profit & Loss Account for the year ended 31st March, 2011
|
|
Rs |
|
Rs |
|
To Opening stock |
90,000 |
By Sales |
9,00,000 |
|
To Purchases |
5,60,000 |
By Closing stock |
90,000 |
|
To Wages |
2,14,000 |
|
|
|
To Gross profit |
1,26,000 |
|
|
|
|
9,90,000 |
|
9,90,000 |
|
To Salaries |
16,000 |
By Gross profit |
1,26,000 |
|
To Electricity |
10,000 |
|
|
|
To Miscellaneous expenses |
10,000 |
|
|
|
To Depreciation |
30,000 |
|
|
|
To Net profit |
60,000 |
|
|
|
|
1,26,000 |
|
1,26,000 |
Balance Sheet as on 31.3.2011
|
|
Rs |
|
Rs |
|
|
Share capital: |
|
Fixed assets |
5,40,000 |
|
|
Equity shares |
1,80,000 |
Less: Depreciation |
1,50,000 |
3,90,000 |
|
Reserve and surplus |
1,20,000 |
|
|
|
|
Secured loans |
2,10,000 |
Current assets: |
|
|
|
|
|
Stock |
90,000 |
|
|
Current liabilities: |
|
Sundry debtors |
1,05,000 |
|
|
Sundry creditors |
90,000 |
Cash |
15,000 |
2,10,000 |
|
|
6,00,000 |
|
6,00,000 |
|
Discuss under the following important functional groupings the usual ratios and comment on the financial strength of the company:
(i) Liquidity and solvency test ratios;
(ii) Profitability test ratios; and
(iii) Overall measures ratios.