X 100 EAT + Interest 32,783 - 12,400 + 23,000 -x 100 - 13.7% per cent Capital emploted 1,70,700 EAT + Interest - tax advantage on interest 20,383 +Rs 3,000 - 31.136 (111) -X100 Capital employed 21,70,700 -x100 - 13% per cent **Effective tax rate - 212,400/32,783 - 37.8 per cent) P.6.16 Towards the end of previous year, the directors of A Ltd decided to expand the business. The annual accounts of the company for the previous year and current year are summarised as given: Particulars Previous year Current year Sales: Cash 30,000 32,000 Credit 2,70,000 23,00,000 3,42,000 23,74,000 Cost of goods sold 2,36,000 2,98,000 Gross margin 64.000 76,000 Expenses: Warehousing 13,000 14,000 Transport 6.000 10,000 Administration 19.000 19,000 Selling 11,000 14,000 Debenture interest 2,000 49,000 59,000 Net profit 15,000 17.000 Fixed assets (less depreciation) 30,000 Current assets: Stock 60,000 94.000 Debtors 50,000 82.000 Cash 10,000 1,20,000 7,000 1,83,000 Less: Current liabilities (trade creditors) 50,000 76,000 Net current assets 70,000 1,07,000 1,00,000 1,47,000 Share capital 75,000 75,000 Reserves and undistributed profit 25,000 42.000 Debentures 30.000 1,00,000 1.47.000 40,000 y23 You are infrormed that, (a) all sales were from stocks in the company's warehouse, (b) the range of merchandise was not changed and buying prices remained steady throughout the 2 years, (c) the stocks as on April 1 previous year was 40,000 and (d) the debenture loan was received on April 1 current year and fixed assets were purchased on that date. You are required to work out the following accounting ratios for both the years. (i) Gross profit ratio (ii) Operating expenses to sales (iii) Operating profit ratio (iv) Capital tumover ratio (v) Stock turnover ratio (vi) Net profit to capital employed ratio and (vii) Debtors collection period (in days). Your answer should give the figures calculated to one decimal place, together with possible reasons for changes in the ratios for 2 years. Ratios relating to capital employed should be based on the capital at the end of the year. Ignore taxation