Ratios Lecture 04 Part F
Transcript
00:00It will be less, you don't have to worry about it.
00:03Okay?
00:04Get out, get out.
00:05I'll be back in 20 seconds.
00:25Are you leaving?
00:26Yes, sir.
00:27Okay, now tell me what will happen in the stock turnover ratio?
00:32Think about it.
00:33Look at the formula for stock turnover, son.
00:35Then tell me what will happen.
00:37Have you seen the formula for stock turnover?
00:40What is the formula, kids?
00:49Stock turnover means CGS
00:54divided by inventories.
00:57I told you the formula.
00:59CGS will be less.
01:01If CGS is less, then numerator?
01:03Less.
01:04If numerator is less, then ratio?
01:06Less.
01:07Then what should we take along with it?
01:09Decrease.
01:10Good.
01:27What is the next ratio?
01:42Return for non-current asset.
01:45Tell me.
01:46Will it make any difference?
01:49First go to the formula, son.
01:51And see if it will make any difference.
01:58What is the next ratio?
02:11Use your brain, brother.
02:12We'll talk about it later.
02:16Is it right, son?
02:17Yes, it is.
02:22Is it right, son?
02:23Yes.
02:24Look at the formula.
02:25Are you poor?
02:26Why don't you get a book?
02:29Whose formula is this?
02:30CGS formula.
02:37Are you poor?
02:38Very poor.
02:40Very poor.
02:41How much?
02:42More than my grades?
02:43I don't have a book.
02:46Why don't you get a book soon?
02:49I don't have a book.
02:50The one who doesn't have a book is poor.
02:53Listen.
02:55Tell me.
02:56What is the formula, children?
02:59The formula we have is
03:00return on non-current assets.
03:15In this problem,
03:16I am paying one liability
03:18with the same liability.
03:20I am paying one liability
03:22with the same liability.
03:23The non-current asset denominator
03:24does not make a difference.
03:26Does it make a difference
03:27in the PBIP?
03:28How?
03:30CGS is less.
03:31CGS is less.
03:32CP will increase.
03:33CP will increase.
03:35Operating profit will also increase.
03:36What is the operating profit in this?
03:38Numerator.
03:39If the numerator increases,
03:40what will happen to the ratio?
03:42It will increase.
03:45Look at it.
03:46I have explained the reason.
03:47Let's talk for half a minute.
03:48Is it clear or not?
03:49Let's talk for half a minute.
03:50Is it clear or not?
03:58Listen again.
04:00Look at it again.
04:01What is the formula?
04:03Return on
04:05PBIP divided by CGS.
04:07Is there any difference in the formula?
04:09Is the formula clear?
04:10Okay.
04:11I am paying one liability
04:12with the same liability.
04:14Non-current assets
04:15are not involved in this problem.
04:17Non-current assets
04:18will remain unchanged.
04:19What will be the denominator?
04:20Unchanged.
04:21But if I
04:23pay my supplier on time,
04:25I will get a 5% discount.
04:28If I get a 5% discount,
04:29the purchase price will decrease.
04:31If the purchase price decreases,
04:32CGS will decrease.
04:34If CGS decreases,
04:35the gross profit will increase.
04:37If the gross profit increases,
04:38the operating profit will also increase.
04:40If the operating profit increases,
04:41the numerator increases.
04:43If the numerator increases,
04:44the ratio increases.
04:46Is it clear?
04:47Let's move ahead.
04:49What is written ahead?
04:51Current ratio with
04:52quick ratio.
04:58In quick ratio,
04:59we write
05:01current assets
05:03minus inventory
05:06divided by
05:07current liabilities.
05:10Because of paying
05:11suppliers on time,
05:14my liability is affected.
05:16Current assets are affected.
05:19If I pay liability of Rs. 100,
05:21I will have to pay Rs. 400.
05:23If I pay liability of Rs. 90,
05:24I will have to pay Rs. 100.
05:26If I pay liability of Rs. 500,
05:27the liability will decrease.
05:29If the liability decreases,
05:30the denominator decreases.
05:32If the denominator decreases,
05:33the ratio increases.
05:35Is it clear, friends?
05:36What is the answer to this?
05:38Increase.
05:41So, this feeling
05:42should be relaxed.
05:43So, the time is less in paper,
05:44so, if you draw it on everyone,
05:45it is written as increase in all.
05:48A person will be fine.
05:52So, this is written as
05:53decrease in all.
05:54There is no effect,
05:55so, it is written as increase.
05:57It is written as increase in all.
05:58But some people
05:59will have some problem.
06:04Yes, in majority,
06:05it is written as decrease.
06:07But,
06:08there is a mixed answer.
06:09Increase, decrease.
06:13All of them are wrong.
06:15All of them are wrong.
06:17No, no, no.
06:19Let's go to the next paragraph.
06:23It says,
06:25Selling slow-moving stock items
06:27at a price equal to cost.
06:31This means that
06:33you are selling at a cost,
06:35not at a profit.
06:37For example,
06:39earlier it was
06:43earlier it was
06:45that you were selling
06:47for example
06:49at a price of Rs. 120,000.
06:51That is the price
06:53at which you were selling.
06:55Cost is Rs. 100,000
06:57and what is the GP?
06:59Rs. 20,000.
07:01But now,
07:03you are selling
07:05at the same price
07:07as the cost.
07:09And what is the GP?
07:11First of all,
07:13what is the profit percentage?
07:1530%.
07:17And how much is the profit?
07:190%.
07:21And what is the GP ratio?
07:233.1.
07:253.1.
07:31Tell me, kids.
07:33Is this clear or not?
07:41Tell me.
07:43Is it clear?
07:47What is the second ratio?
07:49Net profit ratio.
07:51Yes, tell me.
07:53If the gross profit is decreasing
07:55and below the net profit
07:57there is an operating expense.
07:59It is not like that.
08:01If the GP is decreasing,
08:03then the net profit will also decrease.
08:05First, you have to convince yourself.
08:07What is the GP in this case?
08:09It is decreasing.
08:11Is it because of this
08:13that something is not going in the operating expense?
08:15If it is because of this
08:17that something is going in the operating expense,
08:19then you have to think
08:21whether the net profit ratio has really decreased or not.
08:23For example,
08:25as it was mentioned in your IDE,
08:27can you give inventory in charity?
08:29Or can you give a free sample?
08:31Or can there be
08:33drawings of inventory?
08:35If you draw inventory,
08:37then what will happen?
08:39Purchases will decrease.
08:41CGS will decrease.
08:43If CGS decreases, then the GP will also decrease.
08:45Net profit will also decrease.
08:47Because it will not go below the drawing.
08:49Below the drawing.
08:51But if you...
08:57Is the door closed?
08:59Come inside.
09:01I don't know where it is from.
09:03Is there anyone inside?
09:05Is there anyone inside?
09:07Come in.
09:11Look at me.
09:13Look at your father.
09:15Rohani.
09:17Is his name Rohani?
09:19Yes.
09:21Look at your father.
09:23Rohani.
09:25So, whoever comes, let's start living.
09:27There is so much destruction in your life.
09:29There are girls standing here.
09:31If there was a girl, you would have fainted.
09:35And now,
09:37they don't even look beautiful.
09:39You keep looking at them.
09:43Shah Rukh.
09:45Shah Rukh is sitting there.
09:49Shah Rukh was sitting there.
09:51The world has come.
09:53There was a sample sitting in the back.
09:55Who comes?
09:57No, sir.
09:59Take a picture of me.
10:01Go ahead.
10:03Go ahead.
10:05Yes.
10:07The example I was giving is not necessary.
10:09If the GDP increases, the net profit increases.
10:11For example,
10:13you give some inventory free samples.
10:15When you give a free sample,
10:17it won't be sold.
10:19It won't be in the cost of goods sold.
10:21It will be purchased.
10:23The GDP will increase.
10:25But if you give a free sample,
10:27the selling and distribution expense will increase.
10:29What will happen?
10:31The distribution expense will increase.
10:33Now, the GDP is increasing.
10:35But the expense below
10:37will be less.
10:39The net profit will be less.
10:41So, there is no guarantee
10:43that if the GDP increases, the net profit will also increase.
10:45The girl
10:47won't look beautiful.
10:49Yes.
10:51Is it right, friend?
10:53So, if the GDP increases, there is no guarantee
10:55that the GDP will increase and the net profit will also increase.
10:57If the GDP decreases, the net profit will also decrease.
10:59Conceptually,
11:01if something is coming out of CGS,
11:03the operating expense is not going anywhere.
11:05This is not enough.
11:07If you gave a free sample,
11:09that free sample will go to the marketing expense.
11:11If you take it out of the purchase,
11:13the purchases will decrease.
11:15The CGS will decrease.
11:17The GDP will increase.
11:19Now, the GDP will increase,
11:21but the selling and distribution expense will decrease.
11:23If the GDP increases, the net profit will increase.
11:25But if the operating expense decreases,
11:27the net profit will decrease.
11:29So, increase and decrease will cancel.
11:31The net profit has no effect.
11:33This is not difficult.
11:35If the GDP increases, the net profit will increase.
11:37When the GDP is decreasing,
11:39then it does not affect the operating expense.
11:41If it doesn't go below the GDP,
11:43then the GDP will increase,
11:45and the net profit will also increase.
11:47If it doesn't go below the GDP,
11:49if the GDP decreases,
11:51then the net profit will also decrease.
11:53Simple.
11:55What is the next ratio?
11:57What is the next ratio?
12:01Net profit ratio
12:03What did we do in this sector?
12:05It was a slow-moving stock
12:07at a price-cost measure
12:09So, this item does not go below the GP
12:13There is no consideration
12:15below the GP
12:17So, the direct effect on the GP
12:19will be the net profit
12:21If an item has to go below the GP
12:23even if it is above the GP
12:25then think before you answer
12:27What will happen in this situation?
12:29What will happen?
12:31The net profit will be less
12:33You have to do this in half a minute
12:35You have to remember one thing
12:37If an item goes above the GP
12:39and below the GP
12:41then how will you think about it?
12:43And if an item is coming above the GP
12:45then the answer will be simple
12:47Because if it is not coming below the GP
12:49then the net profit will also increase
12:51If an item is coming above the GP
12:53then the net profit will also decrease
12:55But if an item is coming below the GP
12:57then what will it do to the net profit?
12:59It will have an effect
13:01Otherwise, the effect is simple
13:03I will say it again
13:05If an item is coming above the GP
13:07and not below the GP
13:09then if it increases the GP
13:11then the net profit will also increase
13:13And if it decreases the GP
13:15then the net profit will also decrease
13:17Now, with this sentence
13:19Let's revise the first two ratios
13:41What will be the homework?
13:43Listen carefully
13:45You have to revise the first two ratios
13:47And these questions
13:49You have to write the numerator and denominator
13:51of each ratio
13:53You have to do all the blanks
13:55Physics is all wrong
13:57I am explaining like this
13:59But you have to understand
14:01You have to do all the blanks
14:03You have to write such a formula
14:05that you have to use once
14:07See, numerator will have an effect
14:09and denominator will have an effect
14:11If the numerator increases
14:13then the ratio will increase
14:15If the denominator increases
14:17then the ratio will increase
14:19If the denominator decreases
14:21then the ratio will increase
14:23You have to do all the blanks
14:25Tomorrow we will discuss this
14:27and we will do the second question
14:29and the third question
14:31that we will do the limitation of ratios
14:33and then we will conclude the topic
14:35Okay friends?
14:37See you tomorrow
14:39Don't get upset if I don't complete
14:41I always scold you
14:43I always scold you
14:45but you don't get upset
14:47This is what happens
14:49Assalamualaikum