Question

Dr.	Trading and Profit and Loss Account for the year ended 31st March 2022		Cr.
Particulars	Amount (₹)	Particulars	Amount (₹)
To Opening Stock	4,00,000	By Sales	24,00,000
To Purchases	18,00,000	By Closing Stock	6,00,000
To Wages	2,00,000
To Gross Profit c/d	6,00,000
Total	30,00,000	Total	30,00,000
To Office Expenses	2,50,000	By Gross, Profit b/d	6,00,000
To Selling Expenses	2,00,000
To Finance Expenses	60,000
To Net Profit c/d	90,000
	6,00,000		6,00,000

The company had the following current assets and current liabilities: https://www.maharashtrastudy.com

Debtors ₹ 1,20,000, Creditors ₹ 60,000, Stock ₹ 60,000, Bills Payable ₹ 40,000, Loose Tools ₹ 20,000, Bank Overdraft ₹ 20,000.

Calculate the following ratios:

1. Gross Profit Ratio
2. Operáting Ratio
3. Net Profit Ratio
4. Current Ratio

Answer 1

(1) Gross Profit Ratio:

Gross Profit Ratio = `"Gross Profit"/"Net Sales" xx 100`

= `(6,00,000)/(24,00,000) xx 100`

= 25%

(2) Operating Ratio:

Operating Ratio = `"Cost of Goods Sold + Operating Expenses"/"Net Sales" xx 100`

Cost of goods sold = Opening Stock + Purchases + Wages − Closing Stock

= 4,00,000 + 18,000 + 2,00,000 − 6,00,000

= 18,00,000

Operating Expenses = Office Expenses + Selling Expenses

2,50,000 + 2,00,000

= 4,50,000

Operating Ratio = `(18,00,000 + 4,50,000)/(24,00,000) xx 100`

= 93.75%

(3) Net Profit Ratio:

Net Profit Ratio = `"Net Profit"/"Sales" xx 100`

= `(90,000)/(24,00,000) xx 100`

= 3.75%

(4) Current Ratio:

Current Ratio = `"Current Assets"/"Current Liabilities"`

Current Assets = Debtors + Stock + Loose Tools

= 1,20,000 + 60,000 + 20,000

= 2,00,000

Current Liabilities = Creditors + Bills Payable + Bank Overdraft

= 60,000 + 40,000 + 20,000

= 1,20,000

Current Ratio = `(2,00,000)/(1,20,000)`

= `20/12`

= `5/3`

= 5 : 3