Question 8: The following Trading and Profit and Loss Account of Fantasy Ltd. for the year 31-3-2000 is given below: Particular Particular To Opening Stock # Purchases Carriage and Freight Wages Gross Profit b/d To Administration expenses "Selling and Dist. expenses "Non-operating expenses "Financial Expenses Net Profit c/d Calculate: 1. Gross Profit Ratio 1. Net Profit Ratio Rs. 76,250 By Sales 3,15,250" Closing stock 2,000 5,000 2,00,000 5,98,500 1,01,000 By Gross Profit b/d 12,000 "Non-operating incomes: 2,000 "Interest on Securities 7,000 "Dividend on shares 84,000 "Profit on sale of shares 2,06,000 2. Expenses Ratio 3. Operating Ratio 5. Operating (Net) Profit Ratio 6. Stock Turnover Ratio. Rs. 5,00,000 98,500 5,98,500 2,00,000 1,500 3,750 750 2,06,000

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Financial Ratios

A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.

Return on Equity

The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.