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16 17 18 Total payable rallo payment to creu Average Lower ratio means Accounts Payable that credit for more days is available. Current Ratio Current Assets Measures short term debt paying ability Current Liabilities acceptable limit is 1.5 1 in a competitive industry Quick or liquid Quick assets A refined measures of or acid test the short-terms debt paying Current Liabilities ability by measuring short-term liquidity Accepted limits is 0.75:1. Proprietary Shareholders Measures Ratio Funds conservatism of capital structure and Total Tangible Assets shows the extent of shareholders' funds in the total assets employed in the business Debt Ratio External Equities Indicates the percentage of funds Internal Equities being financed through borrowings. Recommended IS Long-term Debt 1.5:1 (normal industry) and 4: 1 for Networth heavy and capital intensive industry 19 Problem 1 The following figures relate to the trading activities of Hind Traders for the year ended 30th June, 19X1: Sales 4 Purchases Opening Stock Closing Stock 15,00,000 Administrative expenses 9,66,750 Salaries 2.28,750 Rent 2.95,500 Stationery, postage etc 60,000 Depreciation Other charges 81,000 8,100 7,500 27,900 49,500 and Sales retums Selling distribution expenses Salaries Advertising 45,900 Provision for taxation 1,20,000 14,100 Non-operating income 27,000 9,000 Travelling Non-operating expenses Loss on sale of assets 6.000 Dividend on shares Profit on sale of shares 12.000 You are required to (1) rearrange the above figures in a form suitable for analysis, and (2) show separately the following ratios: () gross profit ratio; (ii) operating ratio; (iii) stock turnover ratio (C.A. adapted)