Question

From the following information calculate Gross Profit Ratio, Inventory Turnover Ratio and Trade Receivables Turnover Ratio.

	Rs
Revenue from Operations	3,00,000
Cost of Revenue from Operations	2,40,000
Inventory at the end	62,000
Gross Profit	60,000
Inventory in the beginning	58,000
Trade Receivables	32,000

Answer 1

Gross Profit Ratio = `" Gross Profit"/"Net Revenue from Operations"` x 100

Gross Profit = Net Revenue from Operations - Cost of Revenue from Operations
= 3,00,000 - 2,40,000
= 60,000

Gross Profit Ratio = `[60,000]/[3,00,000]` x 100 = 20 %    

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

Average Inventory = `["Inventory in the beginning" + "Inventory at the end"]/2`
= `[58,000 + 62,000]/2`

= 60,000

Inventory Turnover Ratio = `[240,000]/[60,000]` = 4 times

Trade Receivables Turnover Ratio = `"Net Revenue from operations"/"Average Trade Receivables"`

= `[3,00,000]/[32,000] = 9.4 times

Note: In the solution, Trade Receivables are assumed as the Average Trade Receivables