A Company Had a Liquid Ratio of 1.5:1 and a Current Ratio of 2:1. Its Inventory Turnover Ratio Was 6 Times. It Had Total Current Assets of 2,00,000. Find Out Revenue from Operations If the Goods - Accountancy

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Ledger

A company had a liquid ratio of 1.5: 1 and a current ratio of 2: 1. Its inventory turnover ratio was 6 times. It had total current assets of 2,00,000.
Find out revenue from operations if the goods are sold at a 25% profit on cost.

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Solution

Current Assets

=

₹ 2,00,000

Current Ratio of the firm

=

Current Assets/Current Liabilities

2

=

2,00,000/Current Liabilities

Current Liabilities

=

₹1,00,000

Quick Ratio

=

Quick Assets/Current Liabilities

1.5

=

Quick Assets/1,00,000

Quick Assets

=

₹ 1,50,000

We know that, Quick Assets

=

Current Assets – Stock

Using the above formula, Stock

=

Current Assets – Quick Assets

 

=

₹(2,00,000 – 1,50,000)

 

=

₹ 50,000

Assuming stock to be average stock

   

Inventory Turnover Ratio

=

Cost of goods sold/Average Stock

6

=

Cost of Goods sold/50,000

Cost of Goods Sold

=

₹ 3,00,000

Profit on Sale of Goods

=

₹(3,00,000 × 25/100) = ₹ 75,000

Revenue from Operations

=

Cost of Goods Sold + Gross Profit

 

=

₹ (3,00,000 + 75,000) = ₹ 3,75,000

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