1. Write short notes on:
(a) Liquidity test ratio
(b) Acid test ratio
(c) Profitability test ratios
(d) Turnover ratios.
2. “Inter-firm comparison is carried out with the help of ratios although they are not exclusive and conclusive indicators of performance”. Examine.
3. Prepare a proforma income statement for the month of April, May and June for Eastern Ltd. from the following information’s:
(i) Sales are projected at Rs.4,50,000, Rs.4,80,000 and Rs.4,30,000 for April, May and June respectively.
(ii) Cost of goods sold is Rs.1,00,000 plus 30% of selling price per month.
(iii) Selling expenses are 4% of sales.
(iv) Rent Rs.15,000 per month.
(v) Administrative expenses for April are expected to be Rs.1,20,000 but are expected to rise 2% per month over the previous month’s expenses.
(vi) The company has Rs.5,00,000 of 12% loan, interest payable monthly.
(vii) Corporate tax expected is 40%.