Current Assets to Proprieors Funds

8/9/2019 Current Assets to Proprieors Funds

1/8

CURRENT ASSETS TO PROPRIEORS FUNDS:CURRENT ASSETS TO PROPRIEORS FUNDS:

YEARSYEARS CURRENTCURRENT

ASSETSASSETS

SHARE HOLDERSSHARE HOLDERS

FUNDSFUNDS

RATIORATIO

20042004--0505

20052005--0606

20062006--0707

20072007--0808

20082008--0909

5540168155401681

8957132289571322

117935932117935932

456210996456210996

252791794252791794

131498110131498110

157697919157697919

208874765208874765

248525891248525891

278284181278284181

0.420.42

0.560.56

0.560.56

1.831.83

0.900.90

A higher ratio of current assets to proprietors funds is consideredA higher ratio of current assets to proprietors funds is considered

as financial strength to the business. it is necessary to holdas financial strength to the business. it is necessary to hold

adequate funds in working to capital to generate profits.adequate funds in working to capital to generate profits.

CURRENT ASSETS TO PROPRIETORS FUNDS RATIOCURRENT ASSETS TO PROPRIETORS FUNDS RATIO

CURRENT ASSETSCURRENT ASSETS

SHARE HOLDERS FUNDSSHARE HOLDERS FUNDS


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INFERENCES:INFERENCES:

The ratio of current assets to proprietors funds has increased fromThe ratio of current assets to proprietors funds has increased from

0.42 o 1. 83 from the year 20040.42 o 1. 83 from the year 2004--05 to 200705 to 2007--08 and significantly08 and significantlydecrease from 1.83 to .90. The ratio of current assets to proprietorsdecrease from 1.83 to .90. The ratio of current assets to proprietors

funds is satisfactory.funds is satisfactory.

0

0 .5

1

1 .5

2

2 0 0 4 -0 5 2 0 0 5 -0 6 2 0 0 6-0 7 2 0 0 7 -0 8 2 0 0 8 -0 9

YE

R S

C

R R E N

S S E

S

R

R IE

R S F

N

S

T


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The ratio of fixed assets to net worth indicates the extent to whichThe ratio of fixed assets to net worth indicates the extent to which

share holders funds are sunk in to the fixed assets. Generally theshare holders funds are sunk in to the fixed assets. Generally thepurchase of fixed assets should be financed by shareholders equitypurchase of fixed assets should be financed by shareholders equity

including reserves, surplus and retained earnings.including reserves, surplus and retained earnings.

The ratio establishes the relationship between fixed assets andThe ratio establishes the relationship between fixed assets and

shareholders funds.shareholders funds.

FIXED ASSETS TO NET WORTH RATIO:FIXED ASSETS TO NET WORTH RATIO:

FIXED ASSETS (AFTER DEP)FIXED ASSETS (AFTER DEP)

SHARE HOLDERS FUNDSSHARE HOLDERS FUNDS

YEARSYEARS FIXEDFIXED

ASSETS(AFTERASSETS(AFTER

DEP)DEP)

SHARE HOLDERSSHARE HOLDERS

FUNDSFUNDS

RATIORATIO

20042004--0505

20052005--0606

20062006--0707

20072007--0808

20082008--0909

230446827230446827

285839990285839990

384934112384934112

626383894626383894

842863232842863232

131498110131498110

157697919157697919

208874765208874765

248525891248525891

278284181278284181

1.751.75

1.811.81

1.841.84

2.522.52

3.023.02

FIXEDFIXED ASSETSASSETS TOTO NETNET WORTHWORTH RATIORATIO::


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It shows the fixed asses to net worth ratio. The ratio has increased fromIt shows the fixed asses to net worth ratio. The ratio has increased from

1.75 to 3.02 during the year 20041.75 to 3.02 during the year 2004--05 to 200805 to 2008--09.09.

A fixed asset to net worth ratio of the company is satisfactory.A fixed asset to net worth ratio of the company is satisfactory.

0

0.5

1

1.5

2

2.53

3.5

2004-05 2005-0 200 -07 2007-08 2008-09

YEARS

FIXED ASSETS TO NET WORTH RATIO

RATI


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PROPRIETAR RATIO (OR) EQUIT RATIO:PROPRIETAR RATIO (OR) EQUIT RATIO:

The ratio of proprietors funds to total (proprietors + outThe ratio of proprietors funds to total (proprietors + outsliders) (total funds or total assets) is an important ratio forsliders) (total funds or total assets) is an important ratio for

determining long term solvency of firm. The ratiodetermining long term solvency of firm. The ratio

establishes the relationship between shareholders funds toestablishes the relationship between shareholders funds to

total assets of the firm.total assets of the firm.

Equity ratio:Equity ratio: Share holders fundsShare holders funds

Total assetsTotal assets

yearsyears Share holdersShare holders

fundsfunds

Total assetsTotal assets ratioratio

20042004--0505

20052005--0606

20062006--0707

20072007--0808

20082008--0909

131498110131498110

157697919157697919

208874765208874765

248525891248525891

278284181278284181

263894896263894896

363477693363477693

492759526492759526

810566052810566052

11080810741108081074

0.490.49

0.430.43

0.420.42

0.300.30

0.250.25


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InIn thethe aboveabove tabletable hashas shownshown ProprietaryProprietary ratioratio (or)(or) equityequity ratioratio ..thethe ratioratio hashas

decreaseddecreased fromfrom 00..4949 toto 00..2525 fromfrom thethe yearyear 20042004--0505 toto 20082008--0909.. ThisThis provesproves thatthat thethe

companycompany isis bankingbanking heavilyheavily onon thethe outout sliderssliders (or)(or) creditorscreditors forfor financingfinancing itit affairsaffairs..

0

0 1

0 2

0 3

0 4

0 5

2004 05 2005 0 200 07 2007 08 2008 09

years

proprietary ratio (or) equity ratio


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ABSOLUTE LIQUIDITY RATIO:ABSOLUTE LIQUIDITY RATIO:

AlthoughAlthough receivables,receivables, debtorsdebtors andand billsbills receivablesreceivables arearegenerallygenerally moremore liquidliquid thanthan inventories,inventories, yetyet therethere maymay bebedoubtsdoubts regardingregarding theirtheir realizationrealization intointo cashcash immediatelyimmediately ororinin timetime.. AbsoluteAbsolute liquidliquid assetsassets includeinclude cashcash inin handhand andand atatbankbank andand marketablemarketable securitiessecurities oror temporarytemporary investmentinvestment..TheThe acceptableacceptable normnorm forfor thisthis ratioratio isis 5050%% (or)(or) 00..55 (or)(or) 11::22..

ABSOLUTE LIQUID RATIO=ABSOLUTE LIQUID RATIO= ABSOLUTE LIQUID ASSESTSABSOLUTE LIQUID ASSESTS

CURRENT LIABILITIESCURRENT LIABILITIES

YEARSYEARS CURRENT ASSETSCURRENT ASSETS CURRENT LIABILITIESCURRENT LIABILITIES RATIORATIO

20042004--050520052005--0606

20062006--0707

20072007--0808

20082008--0909

439401443940147440000074400000

29269262926926

3601454636014546

1214570212145702

14930845149308459095596790955967

7348180173481801

142784721142784721

169654192169654192

0.290.290.0810.081

0.0390.039

2.522.52

0.0710.071


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INFERENCE:INFERENCE:

0

0.5

1

1.5

2

2.5

3

2004-05 2005-06 2006-07 2007-08 2008-09

E R

B E I I I R I

RATIO

It is the absolute liquidity ratio from 2004It is the absolute liquidity ratio from 2004--05 o 200805 o 2008--0909

he more rigorous ratio i.e absolute liquidity ratio is slightly low when compared to thehe more rigorous ratio i.e absolute liquidity ratio is slightly low when compared to theaccepted standard is 0.5 so it is necessary to improve the short term financial position.accepted standard is 0.5 so it is necessary to improve the short term financial position.

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Current Assets to Proprieors Funds