Question

Compute Gross Profit Ratio, Working Capital Turnover Ratio, Debt Equity Ratio and Proprietary Ratio from the following information:

 

	Rs
Paid-up Share Capital	5,00,000
Current Assets	4,00,000
Revenue from Operations	10,00,000
13% Debentures	2,00,000
Current Liabilities	2,80,000
Cost of Revenue from Operations	6,00,000

 

Answer 1

`"Gross Profit ratio" = "Gross profit"/"Net Revenue from operations"xx"100`

`"Gross profit" = "Net revenue from operations" - "Cost of revenue from operations"`

                       = `10,00,000 - 6,00,000`

                       = `4,00,000`

`"Gross profit ratio" = "4,00,000"/"10,00,000"xx" 100 = 40%`

`"Working capital ratio" = "Revenue from operaions"/"working capital"`

`"working capital" = "current assets" - "Current Liablities" `

                             =`"4,00,000 - 2,80,000"`

                             = `1,20,000`

`"working capital ratio" = "10,00,000"/"1,20,000"`

                                      = `8.33 "times".`

`"Debt equity ratio" = "Debt"/"equity"`

                                 = `"2,00,000"/"5.00,000" = 2 : 5 = 0.4 : 1`

`"Proprietary Ratio"="shareholders funds"/"total assets"`

`"Total asset" = "Paid up Capital + Debentures + Current Liablities"`                                                                            

(:. `"Total Liablities = Total assets"`)

                     =`5,00,000 + 2,00,000 + 2,80,000`

                     = `9,80,000`

`"Propriertary ratio" = "5,00,000"/"9,80,000" = 25:49 = 0.51 : 1`