(C) Determination of closing stock: Stock velocity of 8 months signifies that the inventory holding period is 8 months, stock turnover ratio is 1.5 = (12 months + 8). Cost of goods sold (Sales - Gross profit) Stock turnover = Average stock 12,00,000 1.5 = Average stock 12,00,000 Average stock - = 18,00,000 1.5 Closing stock - Opening stock - 10,000 (1) Closing stock + Opening stock = 8,00,000 (2) 2 Closing stock + Opening stock - 16,00,000 (3) Or Subtracting (1) from (3) we have, 2 Opening stock = 15,90,000 Opening stock - 37.95,000 Therefore, Closing stock = 8,05,000 (d) Determination of sundry creditors: Creditors velocity of 2 months signifies that the credit payment period is 2 months, In other words, creditors' turnover ratio is 6(12 months + 2). Assuming all purchases to be credit purchases and creditors turnover is based on year-end figures, Credit purchases Creditors turnover ratio Creditors + Bills payable 12,10,000 6 Creditors + 10,000 12,10,000 Creditors + 10,000 2,01,667 6 Creditors - 2,01,667 - 210,000 = 1,91,667 y15 Credit purchases are calculated as follows: Cost of goods sold = Opening stock + Purchases - Closing stock 12,00,000 = 37.95,000 + Purchases - 8,05,000 12,00,000 + 10,000 = Purchases 12,10,000 = Purchases (credit). P.6.4 The capital of E. Ltd. is as follows: 9% Preference shares, 210 each 33,00,000 Equity shares of 10 each 8,00,000 11,00,000 Additional information: Profit (after tax at 35 per cent), 82,70,000; Depreciation, 260,000; Equity dividend paid, 20 per cent Market price of equity shares, 340. You are required to compute the following, showing the necessary workings: (a) Dividend yield on the equity shares, (b) Cover for the preference and equity dividends. (c) Earnings per shares. (d) Price-earnings ratio