The document discusses the concept of window dressing in financial management, highlighting methods used to manipulate financial statements to present a more favorable position than reality. It also outlines key financial ratios such as the current ratio, quick ratio, and stock to working capital ratio, which are used to assess a company's short-term solvency and liquidity. Standard values for these ratios are noted, emphasizing their importance for assessing a business's financial health.

1. Yash Chavan – 407
Patkar-VardeCollege
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Window Dressing :
Window Dressing refers to the art of showing the position of an Organisation at a
better level than the existing one. Itmean true value of the assets & Liabilities are
not shown in balance sheet.
It can be done by following methods :
 Provision of inadequate depreciation on fixed assets.
 Not providing for doubtful debts on debtors.
 Revenue expenditure treated as capital expenditure
 Over valuing stock.
 Showing the items of slow moving, Obsolete, damage stock etc. At full cost.
 Actual Liabilities shown as contingent liability.
 Underestimating Liabilities.
 Showing fictitious credit sales.
Window Dressing is manipulation of accountin which certain adjustmentis made in
such a way by the management that the financial statement show the position of
company much better and sound then the actual position.
FINANCIAL MANAGEMENT

2. Current Ratio :
Itmeasures the shot- term solvency of the business by comparing the currentassets
with currentliabilities. Italso called as “Working-Capital Ratio”.
ItExpressed as a Pure Ratio.
Currentratio of 2 : 1 is regarded as a standard currentratio.
Under ideal condition, a current ratio of 2 : 1 is considered as Safe.
The Chore committee recommended that 1.33 : 1 currentratio should be attained by
the business enterprises for good liquidity position.
FORMULA :
Current Assets Current Liabilities
 Insurance claim  Creditors for goods
 Due from consignee  Bill payable
 Bills Receivable  Outstanding Expenses
 Cash & Bank balance  Income received in advance
 Temporary loans  Sales tax payable
 Prepaid expenses  Advance from customers
 Income tax refund due  Short term loans
Current Ratio = Current Assets/Current Liabilities

3. Quick Ratio :
Quick Ratio indicates the immediate solvency position of the company. Italso
indicates very shortterm financial strength, soundness and solvency concern.
ItExpressed as a Pure Ratio.
Quick ratio of 1 : 1 is considered as Standard or Satisfactory.
Quick ratio is a qualitative ratio compared to currentratio as it measures the
immediate ability of a company to meet its most urgentobligations.
FORMULA :
Quick Assets Quick Liabilities
 Current Assets less stock  Current liabilities less bank overdraft
 Prepaid Expenses  Cash credit
 Excises  Income received in advance
 Advance tax
 Customs
Liquid Ratio = Quick Assets/QuickLiabilities

4. Stock to working Capital :
Its expressed the relationship between the closing stock and the working capital.
Stock is considered as non-quick currentassets and therefore to the extent of stock
in working capital it affects the immediate solvency of concern.
FORMULA :
The ratio Expressed as a pure ratio or as a percentage.
Its essentialfor the smooth functioning of day to day business of an enterprise and
therefore it s essential that funds mustnot be locked-up in moving stock.
Stock to working capital ratio of 1 : 1 i.e. 100% is considered as Standard or
Satisfactory Position.
Stock To Working Capital Ratio = closing Stock / Working Capital x 100.