1. Write short notes on:
(a) Liquidity test ratio
(b) Acid test ratio
(c) Profitability test ratios
(d) Turnover ratios.
2. “Inter firm comparison is carried out with the help of ratios although they are not exclusive and conclusive indicators of performance”. Examine.
3. Prepare a proforma income statement for the month of April, May and June for Eastern Ltd. from the following information’s:
(i) Sales are projected at Rs.4,50,000, Rs.4,80,000 and Rs.4,30,000 for April, May and June respectively.
(ii) Cost of goods sold is Rs.1,00,000 plus 30% of selling price per month.
(iii) Selling expenses are 4% of sales.
(iv) Rent Rs.15,000 per month.
(v) Administrative expenses for April are expected to be Rs.1,20,000 but are expected to rise 2% per month over the previous month’s expenses.
(vi) The company has Rs.5,00,000 of 12% loan, interest payable monthly.
(vii) Corporate tax expected is 40%.