Question

From the following information, calculate:

1. Gross Profit Ratio
2. Inventory Turnover Ratio
3. Current Ratio
4. Liquid Ratio
5. Net Profit Ratio
6. Working Capital Ratio

	Rs.
Revenue from Operations	25,20,000
Net Profit	3,60,000
Cost of Revenue from Operations	19,20,000
Long-term Debts	9,00,000
Trade Payables	2,00,000
Average Inventory	8,00,000
Liquid Assets	7,60,000
Fixed Assets	14,40,000
Current Liabilities	6,00,000
Net Profit before Interest and Tax	8,00,000

Answer 1

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

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

= 25,20,000 − 19,20,000

= 6,00,000

`"Gross Profit Ratio" = (6,00,000)/(25,20,000) xx 100`

= 23.81%

(ii) `"Inventory Turnover Ratio" = "Cost of Revenue from Opearions"/"Average Inventory"`

=`(19,20,000)/(8,00,000)`

= 2.4 times

(iii) `"Current Ratio " = "Current Assets"/"Current Liablities"`

Current Assets = Liquid assets + Inventory

= 7,60,000 + 8,00,000

= 15,60,000

`"Current Ratio" = (15,60,000)/(6,00,000)`

= `2.6/1`

= 2.6 : 1

(iv)  `"Liquid Ratio" = "Liquid Assets"/" Current Liablities"`

= `(7,60,000)/(6,00,000)`

= `1.27/1`

= 1.27 : 1

(v) `"Net Profit Ratio" = "Net Profit"/"Net Revenue From operations" xx 100`

= `(3,60,000)/(25,20,000) xx 100`

= 14.29%

(vi) `"Working capital ratio" = "Revenue from operations"/"working capital"`

working capital = current assets − current liabilities

= 15,60,000 − 6,00,000

= 9,60,000

`"Working capital ratio" = (25,20,000)/(9,60,000)`

= 2.625 times