Operating Ratio (O.R) - Practical problem - 20 marks - Compulsory
2012 year optional Books & Budget (without Books) Question paper
1. Given below are the financial results of Railways for the years 2007-08 and 2008-09.
Figures in Crores of Rs.
Particulars
|
2007-08
|
2008-09
|
Gross Earnings
|
71645
|
79837
|
Traffic Suspense
|
75
|
25
|
Gross Traffic Receipts
|
71720
|
79862
|
Miscellaneous Receipts
|
1557
|
1797
|
Ordinary Working Expenses-OWE
|
41033
|
54349
|
Appropriation to DRF
|
5450
|
7000
|
Appropriation to Pension Fund
|
7979
|
10490
|
Miscellaneous Expenditure
|
480
|
645
|
Net Revenue
|
18334
|
9174
|
Dividend Paid
|
4903
|
4718
|
a) From the above figures, calculate the Operating Ratio for 2007-08 and 2008-09.
b) Comment on performance of the railway in 2008-09 compared to 2007-08, giving possible reasons for improvement /deterioration. Calculate the amount available for sourcing of capital expenditure in each year and how is it normally allocated.
Ready reckoner for calculation of Operating Ratio
SN
|
Particulars
|
formulae
|
Amount
|
SN
|
Particulars
|
formulae
|
Amount
|
Finding
| |
1.
|
Coaching Earnings (less refunds)
|
10
|
OWE - Ordinary Working Expenses
| ||||||
2.
|
Goods Earnings (less refunds)
|
11
|
Appropriation to DRF
| ||||||
3
|
Traffic Earnings
|
(1 + 2)
|
12
|
Appropriation to Pension Fund
| |||||
4
|
Sundry Other Earnings (less refunds)
| ||||||||
5
|
Gross Earnings
|
(3 + 4)
|
13
|
Gross Working Expenses
|
(10 + 11 + 12)
|
O.R = 13/5 x 100
| |||
6
|
Suspense
|
14
|
Suspense
| ||||||
7
|
Gross Receipts
|
(5 + 6)
|
15
|
Gross Expenditure
|
(13 + 14)
| ||||
8
|
Miscellaneous Receipts
|
16
|
Miscellaneous Expenditure
| ||||||
9
|
Total Revenue Receipts
|
(7 + 8)
|
17
|
Total Revenue Expenditure
|
(15 + 16)
|
Net Revenue
= 9 - 17
|
Surplus = Net Revenue minus Dividends paid. (Shortfall if the figure is negative)
Answer
2007-08 year
2007-08 year
SN
|
Particulars
|
formulae
|
Amount
|
SN
|
Particulars
|
formulae
|
Amount
| ||
1.
|
Coaching Earnings (less refunds)
|
10
|
OWE - Ordinary Working Expenses
|
41033
| |||||
2.
|
Goods Earnings (less refunds)
|
11
|
Appropriation to DRF
|
5450
| |||||
3
|
Traffic Earnings
|
(1 + 2)
|
12
|
Appropriation to Pension Fund
|
7979
| ||||
4
|
Sundry Other Earnings (less refunds)
| ||||||||
5
|
Gross Earnings
|
(3 + 4)
|
71645
|
13
|
Gross Working Expenses
|
(10 + 11 + 12)
|
54462
|
O.R = 13/5 x 100 = 76.02 %
| |
6
|
Suspense
|
75
|
14
|
Suspense
|
0
| ||||
7
|
Gross Receipts
|
(5 + 6)
|
71720
|
15
|
Gross Expenditure
|
(13 + 14)
|
54462
| ||
8
|
Miscellaneous Receipts
|
1557
|
16
|
Miscellaneous Expenditure
|
480
| ||||
9
|
Total Revenue Receipts
|
(7 + 8)
|
73277
|
17
|
Total Revenue Expenditure
|
(15 + 16)
|
54942
|
Net Revenue
= 9 - 17 = 18335
|
Surplus = Net Revenue minus Dividends paid. (Shortfall if the figure is negative)
surplus = 18335 - 4903 = 13432
2008-09 year
SN
|
Particulars
|
formulae
|
Amount
|
SN
|
Particulars
|
formulae
|
Amount
| ||
1.
|
Coaching Earnings (less refunds)
|
10
|
OWE - Ordinary Working Expenses
|
54349
| |||||
2.
|
Goods Earnings (less refunds)
|
11
|
Appropriation to DRF
|
7000
| |||||
3
|
Traffic Earnings
|
(1 + 2)
|
12
|
Appropriation to Pension Fund
|
10490
| ||||
4
|
Sundry Other Earnings (less refunds)
| ||||||||
5
|
Gross Earnings
|
(3 + 4)
|
79837
|
13
|
Gross Working Expenses
|
(10 + 11 + 12)
|
71839
|
O.R = 13/5 x 100 =89.98 %
| |
6
|
Suspense
|
25
|
14
|
Suspense
|
0
| ||||
7
|
Gross Receipts
|
(5 + 6)
|
79862
|
15
|
Gross Expenditure
|
(13 + 14)
|
71839
| ||
8
|
Miscellaneous Receipts
|
1797
|
16
|
Miscellaneous Expenditure
|
645
| ||||
9
|
Total Revenue Receipts
|
(7 + 8)
|
81659
|
17
|
Total Revenue Expenditure
|
(15 + 16)
|
72484
|
Net Revenue
= 9 - 17 = 9175
|
Surplus = Net Revenue minus Dividends paid. (Shortfall if the figure is negative)
surplus = 9175 - 4718 = 4457
Answers:
1 ) Operating Ratio for year 2007-08 is 76.02 % and for year 2008-09 is 89.98 %
2) i) Possible reasons for deterioration: 11% increase in Earnings is not sufficient to offset the increase of 30 % (average) in OWE, Appropriation to DRF & Pension Fund. The reason for big jump on expenditure side is attributed to implementation of VI Pay commission w.e.f. 01.01.2006, but implemented in the financial year 2008-09 with retrospective effect.
ii) Amount available for sourcing of capital expenditure. - There is no clear cut rule for distribution of surplus among different funds. After meeting the requirements of Development Fund, the left over will be allocated to Capital Fund for incurring of capital expenditure. ( to avoid Dividend liability)
year
|
Surplus
|
Development Fund
|
Capital Fund
|
Remarks
| |
2007-08
|
13432
|
1500
|
11932
|
Notional distribution
| |
2008-09
|
4457
|
1391
|
3066
|
Actual distribution ( as per website of Railways)
| |
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