Question

Calculate the following ratios from the following information:

1. Current ratio
2. Liquid ratio
3. Operating Ratio
4. Gross Profit Ratio

	Rs.
Current Assets	35,000
Current Liabilities	17,500
Inventory	15,000
Operating Expenses	20,000
Revenue from Operations	60,000
Cost of Revenue from Operations	30,000

Answer 1

(i) Current Ratio = `"Current Assets"/"Current Liabilities"`

Current Ratio = `(35,000)/(17,500)`

= 2 : 1

(ii) Liquid ratio = `"Liquid Assets"/"Current Liabilities"`

Liquid Assets = Current Assets − Inventory

= 35,000 − 15,000

= 20,000

Liquid ratio = `(20,000)/(17,500)`

= `1.14/1`

= 1.14 : 1

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

= `(30,000 + 20,000)/(60,000) xx 100`

= `(50,000)/(60,000) xx 10`

= 83.33%

(iv) `"Gross Profit Ratio" = "Gross Profit"/"Net Revenue from Operations" xx 100`

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

                        = 60,000 − 30,000

                        = 30,000

Gross Profit Ratio = `(30,000)/(60,000) xx 100`

= 50%