Question

From the following information:

	₹
Opening inventory	5,00,000
Non-Current Assets	5,25,000
Cost of Revenue from Operations	18,00,000
Revenue from Operations	30,00,000
Operating expenses	4,80,000
Interest Charges	1,80,000
Current liabilities	6,00,000
Current Assets	9,75,000
Closing inventory	7,00,000

Calculate the following:

1. Operating ratio
2. Inventory turnover ratio
3. Net Profit Ratio
4. Liquid Ratio

Answer 1

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

= `(₹ 18,00,000  + ₹ 4,80,000)/(₹ 30,00,000) xx 100`

= `(₹ 22,80,000)/(₹ 30,00,000) xx 100`

= 76%

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

= `(₹ 5,00,000  + ₹ 7,00,000)/2`

= `(₹ 12,00,000)/2`

= ₹ 6,00,000

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

= `(₹ 18,00,000)/(₹ 6,00,000)`

= 3 Times

(iii) Net Profit = Revenue from Operations − (Cost of Revenue from Operations + Operating Expenses + Interest)

= ₹ 30,00,000 − (₹ 18,00,000 + ₹ 4,80,000 + ₹ 1,80,000)

= ₹ 30,00,000 − ₹ 24,60,000

= ₹ 5,40,000

Net Profit Ratio = `"Net Profit"/"Revenue from Operation" xx 100`

= `(₹ 5,40,000)/(₹ 30,00,000) xx 100`

= 18%

(iv) Liquid Assets = Current Assets – Inventory

= ₹ 9,75,000 – ₹ 7,00,000

= ₹ 2,75,000

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

= `(₹ 2,75,000)/(₹ 6,00,000)`

= 0.46 : 1