Question

Calculate Gross Profit Ratio from the following data:

Average Inventory ₹3,20,000; Inventory Turnover Ratio 8 Times; Average Trade Receivables ₹4,00,000; Trade Receivables Turnover Ratio 6 Times; Cash Sales 25% of Net Sales.

Answer 1

Inventory Turnover Ratio = 8 times
Average Inventory = Rs 3,20,000

Stock turnover Ratio = `"Cost of Goods Sold"/"Average Stock" = Cost of Goods Sold/320000` = 8 times

Cost of Goods sold = 25,60,000
Trade Receivables Turnover Ratio = 6 times
Average Trade Receivables = Rs 4,00,000

Trade Receivable Turnover Ratio = `"Net Credit Sales"/"Average Trade Receivables"`

`6 = "Net Credit Sales"/400000`

Net Credit Sales = 24,00,000
Total Sales = Cash Sales + Credit Sales
Total Sales = 25% of Total Sales + Credit Sales
75% of Total Sales = 24,00,000

Total Sales =`2400000/75% = 3200000`

Gross Profit = Total Sales – Cost of Goods Sold
= 32,00,000 – 25,60,000 = 6,40,000

Gross Profit Ratio = `"Gross Profit"/"Net Sales" xx 100`

`= 640000/3200000 xx 100 = 20 %`