Question

Calculate current assets of a company from the following information:

1. Inventory turnover 4 times.
2. Inventory in the end is ₹ 20,000 more than inventory in the beginning.
3. Revenue from Operations ₹ 3,00,000.
4. Gross profit ratio 20%.
5. Current liabilities ₹ 40,000.
6. Quick ratio 0.75.

Answer 1

Gross Profit = 20%

Gross Profit = `20/100 xx ₹ 3,00,000`

= ₹ 60,000

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

₹ 60,000 = ₹ 3,00,000 − Cost of Revenue from Operations

Cost of Revenue from Operations = ₹ 3,00,000 − ₹ 60,000

= ₹ 2,40,000

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

4 = `(₹ 2,40,000)/"Average Inventory"`

Average Inventory = `(₹ 2,40,000)/4`

= ₹ 60,000

Let the Opening Inventory = x

Closing Inventory = x + ₹ 20,000

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

₹ 60,000 = `(x + x + ₹ 20,000)/2`

₹ 60,000 × 2 = 2x + ₹ 20,000

2x = ₹ 1,20,000 − ₹ 20,000

2x = ₹ 1,00,000

x = `(₹ 1,00,000)/2`

Opening Inventory (x) = ₹ 50,000

Closing Inventory = ₹ 50,000 + ₹ 20,000

= ₹ 70,000

Quick Ratio = `"Quick Assets"/"Current liabilities"`

0.75 = `"Quick Assets"/(40,000)`

Quick Asset = ₹ 40,000 × 0.75

= ₹ 30,000

Quick Asset = Current Assets − Inventory

₹ 30,000 = Current Assets − ₹ 70,000

Current Assets = ₹ 30,000 + ₹ 70,000

= ₹ 1,00,000