(i) \(\text { Gross profit ratio }=\frac{\text { Gross Profit }}{\text { Sales }} \times 100\) 
= sales - sales return 
20,40,000 - 40000 = Rs. 20,00,000
Gross profit = sales - cost of revenue from operation
= 20,00,000 - 12,00,000
= \(\frac{8,00,000}{2,00,000} \times 100\) 
= 40%
(ii) \(\text { Net profit ratio }=\frac{\text { Net Profit }}{\text { Sales }} \times 100\) 
Net profit = Rs.5,00,000; sales = Rs.20,00,000
\(\text { Net profit ratio }=\frac{5,00,000}{20,00,000} \times 100\) 
= 25%

\(\text { Creditors Turnover Ratio }=\frac{\text { Credit Purchases }}{\text { Accounts Payable }}\) 
Account Payable = Creditors + Bills Payable 
= Rs.96,000+64,000 = Rs.1,60,000
\(\text { Creditors turnover Ratio }=\frac{\text { Rs. } 9,60,000}{\text { Rs. } 1,60,000}=6 \text { times }\) 
\(\text { Average payment period }=\frac{\text { Months in a year }}{\text { Creditors turnover }}=\frac{12}{6}=2 \text { months }\) 
Creditors Turnover ratio = 6 times ; Average Payment Period = 2 month.

(a) \(\text { Current Ratio }=\frac{\text { Current assets }}{\text { Current liabilities }}\) 
Current Assets = Cash+ Debtors + Bills receivable+ Short term investment + Stock + Prepaid expenses 
= Rs.10,000 + 58,000 + 10,000 + 30,000 + 1,04,000 + 4,000
= Rs.2,16,000
Current Liabilities = Creditors + -Billls payable + Outstanding exp
= 72,000+20,000+16,000
= Rs.1,08,000
\(\text { Liquid Ratio }=\frac{1,00,000}{1,08,000}=1: 1\) 
Current ratio : 2 : 1 ; Liquid ratio : 1 : 1.

\(\text { Total Assets to Debt ratio }=\frac{\text { Total Assets }}{\text { Long Term Debts }}\) 
Total Assets = Non Current Assets + Current Assets
= Rs. 5,40,000 + 1,35,000
= Rs. 6,75,000
Long Term Debts = Long Term Borrowings + Long Term Provisions
= Rs.3,00,000 + 1,50,000
= Rs.4,50,000
Total Assets to Debt Ratio  = \(\frac{6,75,000}{4,50,000}=1.5: 1\)

\(\text { Proprietary Ratio }=\frac{\text { Share holders Funds }}{\text { Total Assets }}\) 
Share holders funds = Current Assets + Noncurrent Assets - Long Term Borrowings - Long Term Provisions - Current Liabilities
= 90,000 + 3,60,000 - 2,00,000 - 1,00,000 - 50,000 = Rs.1,00,00
Total Assets = Current Assets + Non Current Assets
= 90,000 + 3,60,000 = Rs.4,50,000 
Proprietary Ratio = \(\frac{\text { Rs. } 1,00,000}{\text { Rs. } 4,50,000}=0.22: 1 \text { (or) } 22 \%\) 
= 90,000 + 3,60,000 = Rs. 4,50,000 
Proprietary Ratio = \(\frac{\text { Rs. } 1,00,000}{\text { Rs. } 4,50,000}=0.22: 1 \text { (or) } 22 \%\)

\(\text { Debt to Equity Ratio }=\frac{\text { Debt }}{\text { Equity }}\) 
Debt = Long Term Borrowing + Long Term Provisions
= Rs.4,00,000 + 2,00,000 
= Rs. 6,00,000
Equity = Current Assets +·Non current assets - Current Liabilities - Long Term Borrowing - Long Term Provisions 
= Rs.1,80,000.+ 7,20,000 - 1,00,000 - 4,00,000 - 2,00,000
= Rs.2,00,000 
\(\text { Debi to Equily Ratio }=\frac{6,00,000}{2,00,000}=3: 1\)

\(\text { Current Ratio }=\frac{\text { Current assets }}{\text { Current liabilities }}\) 
Current Assets = Total Assets - Noncurrent Assets
= Rs.1, 00,000 -Rs.50,000
= Rs.50,000
Current Liabilities = Total Assets - Share holders' fund - Noncurrent liabilities
= Rs.1,00,000 - 60,000 - 20,000
= Rs.20,000
\(\text { Current Ratio }=\frac{50,000}{20,000}=2.5: 1\)

Let the current liabilities = x;
Current ratio = 3.5:1
Therefore, current assets = 3.5 x
Quick ratio = 2 :1
Therefore, quick or liquid assets = 2x
Liquid assets Current assets - Inventory
2x = 3.5x - 1,50,000
⇒ 2x - 3.5x - 1,50,000  (or)
1.5x = -1,50,000
x = \(\frac { 1,50,000 }{ 1.5 } \) = 1,00,000
Current liabilities = Rs.1,00,000
Current assets = 3.5 x 1,00,000
= Rs.3,50,000
Values that can be associated with the business are
(i) Doing Your Best : Business is doing its beast in keeping its liquidity ratios well above the ideal ratios.
(ii) Safety: Business shows safety towards its short-term creditors by maintaining such short-term solvency ratios.

Values reflected by the company are
(i) Doing Your Best: A company does its best by analysing the financial ratios and enabling the interested parties in taking better decisions about investing and tending.
(ii) Transparent: A company works towards transparency by simplifying the accounting information for various users.

Current ratio = \(\frac { Current\quad assets }{ Current\quad liabilities } \)
= \(\frac { 10,00,000 }{ 4,00,000 } \) = 2.5:1
Yes, it is satisfactory, as it exceeds the ideal ratio of 2:1
Value exhibited by Maxell Ltd. is ability to honour their debts on time.

(i) Gross profit ratio: Gross profit ratio is the proportion of gross profit to net revenue from operations. Gross profit ratio shows the margin of profit available out of revenue from operations. It is computed as below:
Gross profit ratio = \(\frac { Gross\quad profit }{ Net\quad revenue\quad from\quad operations } \) x 100
(ii) Net profit ratio: Net profit ratio is the percentage of net profit on revenue from operations. It is calculated as under:
Net profit ratio = \(\frac { Net\quad profit\quad after\quad tax }{ Revenue\quad from\quad operations } \) x 100

Credit payment period is the average time taken by the business for payment of accounts payables. Lesser the credit payment period, greater is the efficiency of the management in managing accounts payable as it indicates quicker settlement of trade payable. It is calculated as follows.
Credit payment period (in days) = \(\frac { Number\quad of\quad months\quad in\quad a\quad year }{ Trade\quad payable\quad sturn\quad over\quad ratio } \quad \) x 100
Credit payment period (in months) = \(\frac { Number\quad of\quad months\quad in\quad a\quad year }{ Trade\quad payable\quad sturn\quad over\quad ratio } \quad \).

Debt collection period is the average time taken to collect the amount due from trade receivables. Lesser the debt collection period, greater is the efficiency of management in collection of cash from trade receivables. It is calculated as follows:
Debt collection period (in days) = \(\frac { Number\quad of\quad days\quad in\quad a\quad year }{ Tradereceivablesturnoverratio } \)
Debt collection period (in months) =\(\frac { Number\quad of\quad days\quad in\quad a\quad year }{ Trade\quad payable\quad sturn\quad over\quad ratio } \).

(i) Long-term solvency means the firm's ability to meet its liabilities in the long run.
(ii) Long term solvency ratios help to determine the ability of the business to repay its debts in the long run.
(iii) The following ratios are normally computed for evaluating long term solvency of the business:
(i) Debt equity ratio
(ii) Proprietary ratio
(iii) Capital gearing ratio

Traditional classification of ratio is done on the basis of the financial statements from which the ratios are calculated. Under the traditional classification, the ratios are classified as:
(i) Balance sheet ratios,
(ii) Income statement ratios and
(iii) Inter-statement ratio.
(i) Balance sheet ratio: If both items in a ratio are from balance sheet, it is classified as balance sheet ratio.
(ii) Income statement ratio: If the two items in a ratio are from income statement, it is classified as income statement ratio.
(iii) Inter-statement ratio: If a ratio is computed with one item from income statement and another item from balance sheet, it is called inter-statement ratio.