What are the different ratios used in ascertaining profit prior to incorporation? (b) Time Ratio between Pre-incorporation and Post-incorporation period should be computed. Usually fixed expenses are allocated on the basis of Time Ratio, viz. Rent, Tax, Insurance, Depreciation, Interest, Salaries to Office Staff, etc.
What is sales ratio in profit prior to incorporation? Calculation of ratio of sales: Let the average sales per month in pre – incorporation period be x Then the average sales in Post – incorporation period are 2x. Thus total sales are ( 3 x X ) + ( 12 x 2X ) or 27X.
What is profit prior to incorporation how it is calculated? • “Profit prior to incorporation” is the profit earned. or loss suffered during the period before incorporation. It is a capital profit and is not legally available for distribution as dividend because a company cannot earn a profit before it comes into existence.
How are the different expenses are apportioned to ascertain profit or loss for the periods prior incorporation and post-incorporation explain? All expenses apportion between the pre-incorporation period and post-incorporation is as under • Time ratio – It is used for the apportionment of time expenses related as rent, salary and wages etc, which are related to time.
What are the different ratios used in ascertaining profit prior to incorporation? – Related Questions
What is the ratio formula?
To calculate the ratio of an amount we divide the amount by the total number of parts in the ratio and then multiply this answer by the original ratio. We want to work out $20 shared in the ratio of 1:3. Step 1 is to work out the total number of parts in the ratio. 1 + 3 = 4, so the ratio 1:3 contains 4 parts in total.
What is sales ratio formula?
The formula for calculating the cost of sales ratio is: (**cost of sales) divided by (total value of sales) X 100**
How do you calculate time ratio and sales ratio?
It can be calculated either by dividing the company’s market capitalization by its total sales over a designated period (usually twelve months) or on a per-share basis by dividing the stock price by sales per share. The P/S ratio is also known as a sales multiple or revenue multiple.
How do you calculate time ratio?
The times interest earned ratio is calculated by dividing income before interest and income taxes by the interest expense. Both of these figures can be found on the income statement. Interest expense and income taxes are often reported separately from the normal operating expenses for solvency analysis purposes.
What are the uses of profit prior to incorporation?
Profit prior to incorporation is the profit earned or loss suffered during the period before incorporation. It is a capital profit and not legally available for distribution as dividend because a company cannot earn a profit before it comes into existence.
Which of following expenditure is apportioned on the basis of sales ratio?
Answer: Sales Ratio must be found out between Pre-incorporation and Post-incorporation period and usually selling expenses or variable expenses are allocated on the basis of Sales Ratio, viz. Advertisement, Godown Rent, Storage, Discount Allowed, Carriage Outwards, Salesmen’ Salaries and Commission, etc.
Which of the following expenses is not allocated on the basis of time ratio?
There are certain expenses which cannot be apportioned or allocated among the different departments on a suitable basis, the same should be transferred to General Profit and Loss Account (e.g., Interest on Capital, Debenture Interest, Loss on sale of assets, Interest on loan, General Manager’s Salary etc.).
What are ratio types?
Ratio Analysis is done to analyze the Company’s financial and trend of the company’s results over a period of years where there are mainly five broad categories of ratios like liquidity ratios, solvency ratios, profitability ratios, efficiency ratio, coverage ratio which indicates the company’s performance and various
What is the ratio between two different quantities?
A rate is a ratio that compares two different quantities that have different units of measure. A rate is a comparison that provides information such as dollars per hour, feet per second, miles per hour, and dollars per quart, for example. The word “per” usually indicates you are dealing with a rate.
What are the equivalent ratios?
Equivalent ratios are those that can be simplified or reduced to the same value. In other words, two ratios are considered equivalent if one can be expressed as a multiple of the other. Some examples of equivalent ratios are 1:2 and 4:8, 3:5 and 12:20, 9:4 and 18:8, etc.
What is a good PE ratio?
A higher P/E ratio shows that investors are willing to pay a higher share price today because of growth expectations in the future. The average P/E for the S&P 500 has historically ranged from 13 to 15. For example, a company with a current P/E of 25, above the S&P average, trades at 25 times earnings.
What is a good PB ratio?
A PB ratio of 1 is a good PB ratio for stocks. However, PB ratio up to 3 is acceptable. How to use PB ratio to discover an overvalued stock?
What is P CF ratio?
The price-to-cash flow (P/CF) ratio is a stock valuation indicator or multiple that measures the value of a stock’s price relative to its operating cash flow per share. The ratio uses operating cash flow (OCF), which adds back non-cash expenses such as depreciation and amortization to net income.
How do you treat profit prior to incorporation and profit after incorporation?
The profits earned during the pre-incorporation period are transferred to the capital reserve account. If the company incurs losses prior to incorporation, it will be treated as a capital loss and transferred to the goodwill account.
How is profit sharing ratio calculated?
1. How to Calculate a new Profit Sharing Ratio? Ans. When a new partner buys his/her share of profit from an old partner, the new profit sharing ratio of the former partner can be calculated by deducting the sacrifice made by the old partner from his/her existing share of profit.
Is a high P S ratio good?
Price-to-sales (P/S) ratios between one and two are generally considered good, while a P/S ratio of less than one is considered excellent. As with all equity valuation metrics, P/S ratios can vary significantly between industries.
How is profit prior to incorporation treated as Mcq?
Capital Profit: The profit earned up to the date of incorporation of the company is a capital profit, because these profits have been earned before the company came into existence. Such profits are known as profit prior to incorporation and transferred to the Capital Reserve a/c.
What is sales ratio in corporate accounting?
The Accounts Receivable to Sales Ratio is a business liquidity ratio that measures how much of a company’s sales occur on credit. When a company has a larger percentage of its sales happening on a credit basis. A firm’s capital structure.
What is the golden ratio constant?
golden ratio, also known as the golden section, golden mean, or divine proportion, in mathematics, the irrational number (1 + Square root of√5)/2, often denoted by the Greek letter ϕ or τ, which is approximately equal to 1.618.
How do you calculate profit capitalization?
Capitalization means to capitalize the profit for getting the value of ideal capital to earn this profit at a normal rate of return. Capitalized Profit= Averge Profit*100/Normal Rate of Return. It is a method to find out the goodwill of the Firm.
What is the basis of allocation of carriage inward cost?
Carriage inwards is the shipping and handling costs incurred by a company that is receiving goods from suppliers. The most appropriate accounting treatment of carriage inwards is to include it in the overhead cost pool that is allocated to the goods produced in an accounting period.