Question

Calculate (i) G.P. Ratio, (ii) Operating Ratio, (iii) Operating Profit Ratio, (iv) Inventory Turnover Ratio, and (v) Working Capital Turnover Ratio from the following figures:

	₹
Purchases	18,30,000
Direct Expenses	4,10,000
Opening Inventory	3,60,000
Closing Inventory	4,40,000
Operating Expenses	5% of Sales
Revenue from Operations	30,00,000
Current Assets (including inventory)	7,00,000
Current Liabilities	2,00,000

Answer 1

(i)

Cost of Revenue from Operations = Opening Inventory + Purchases + Direct Expenses − Closing Inventory

= ₹ 3,60,000 + ₹ 18,30,000 + ₹ 4,10,000 − ₹ 4,40,000

= ₹ 21,60,000

Gross Profit = Revenue from Operations − Cost of Revenue from Operations

= ₹ 30,00,000 − ₹ 21,60,000

= ₹ 8,40,000

Gross Profit Ratio = `"Gross Profit"/"Revenue from Operations" xx 100`

= `(₹ 8,40,000)/(₹ 30,00,000) xx 100`

= 28%

(ii)

Cost of Revenue from Operations = Opening Inventory + Purchases + Direct Expenses − Closing Inventory

= ₹ 3,60,000 + ₹ 18,30,000 + ₹ 4,10,000 − ₹ 4,40,000

= ₹ 21,60,000

Operating Expenses = 5% of Revenue from Operations

= `5/100 xx ₹ 30,00,000`

= ₹ 1,50,000

Operating Ratio = `("Cost of Revenue from Operations" + "Operating Expenses")/"Revenue from Operations" xx 100`

= `(₹ 21,60,000  + ₹ 1,50,000)/(₹ 30,00,000) xx 100`

= `(₹ 23,10,000)/(₹ 30,00,000) xx 100`

= 77%

(iii)

Operating Profit = Gross Profit − Operating Expenses

= ₹ 8,40,000 − ₹ 1,50,000

= ₹ 6,90,000

Operating Profit Ratio = `"Operating Profit"/"Revenue from Operations" xx 100`

= `(₹ 6,90,000)/(₹ 30,00,000) xx 100`

= 23%

(iv)

Average Inventory = `("Opening Inventory + Closing Inventory")/2`

= `(₹ 3,60,000  + ₹ 4,40,000)/2`

= ₹ 4,00,000

Inventory Turnover Ratio = `"Cost of Revenue from Operations"/"Average Inventory"`

= `(₹ 21,60,000)/(₹ 4,00,000)`

= 5.4 Times

(v)

Working Capital = Current Assets − Current Liabilities

= ₹ 7,00,000 − ₹ 2,00,000

= ₹ 5,00,000

Working Capital Turnover Ratio = `"Revenue from Operations"/"Working Capital"`

= `(₹ 30,00,000)/(₹ 5,00,000)`

= 6 Times