Question

Following information is given about a company:

	₹			₹
Revenue From Operations, i.e., Net Sales Gross Profit	1,50,000		Opening Inventory	29,000
Cost of Revenue From Operations	30,000		Closing Inventory	31,000
(Cost of Goods Sold)	1,20,000		Debtors	16,000

From the above information, calculate following ratios:

(i) Gross Profit Ratio,

(ii) Inventory Turnover Ratio, and 

(iii) Trade Receivables Turnover Ratio. 

Answer 1

(i) 

Sales = 1,50,000

Gross Profit = 30,000

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

`= 30000/150000 xx 100 = 20%`

(ii)

Opening Inventory = 29,000

Closing Inventory = 31,000

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

`= (29000 + 31000)/2 = 30000`

Cost of Goods Sold = 1,20,000

Inventroy Turnover Ratio = `"Cost of Goods Sold"/"Average Inventory"`

`= 120000/30000` = 4 Times

(iii)

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

`= 150000/16000 = 9.4 ` times