EVERYONE
by :
DR. T.K. JAIN
AFTERSCHO☺OL
centre for social entrepreneurship
sivakamu veterinary hospital road
bikaner 334001 rajasthan, india
afterschoool@in.com
mobile : 91+9414430763
guess.....
LIABILITIES:
Capital 10, Profit : 53, creditors 3 loan 20. Provision for
bad debt 2 total : 98
ASSETS :
building 4, debtors 10, cash 10, investments 4, plant 20,
furniture 10, closing stock 10 suspense 30 total : 98
Can the company remain solvent in the long term. For finding
solvency, we have to look at the overall ability of the company
to meet its liabilities in the long term.
Total long term debt / fixed interest bearing capital :
(150+150+100) = 400
equity + reserves+profit = (500+70+125) = 695
we have treated preference shares also as debt. The company is
comfortable as Debt can be upto two times equity + reserves.
Profit = 125
equity : 500 (you can take reserves also with equity, if
you wish).
so ROI = 125/500*100 = 25% which is good. If we look
at total capital employed, we can take preference shares,
and debt also to find our ROCE, then we have to take
profit before interest and taxes, but that data is not
available to us.
CREDIT SIDE :
sales : (125-2)=123, closing stock : (15 +1.67)
total :139.67
DEBIT SIDE :
Purchase (61-2)=59, wages 14, total : 73
gross profit : 66.67
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Profit and Loss account
Credit side :
gross profit 66.67, income acrued 1, Prov. For bad debt (excess) 1.25 total : 67.92
Debit side :
salaries (2+1), Depreciation 1, Depreciation on building 1, Repairs 1, rent 1, bad
debts 1, income tax 1
total : 9
outstanding commission
works manager : 3.5 Manager 5
net profit : 49.16
Balance 19
less – sale not taking place 2
less – landlord's rent 1 = 16
less bad debt written off = 1
debtors 15
make a provision on 15 @ 5% = .75
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Provision for bad debt
Opening balance : 3
less bad debt 1
closing balance 2
but we have to keep it only .75, so remaining
amount will be transferred back to P & L
account = 1.25
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entrepreneurship
THANKS....