Question

Calculate following ratios from the following information:

(i) Current ratio (ii) Acid test ratio (iii) Operating Ratio (iv) 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 Goods Sold	30,000

 

Answer 1

i) `"Current Ratio" = "Current Assets"/"Current Liablities"`

`"Current Ratio" = "35,000"/"17,500" = 2 ; 1`

ii) `"Acid Test Ratio" = "Liquid Assets"/"Current Liablities"`

`"Liquid Assets" = "Current Assets" - "Inventory"`

                          = `"35,000 - 15,000"`

                          = `20,000`

`"Acid test ratio" = "20,000"/"17,500" = "1.143/1 = 1.143 : 1`

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

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

                                     =`"50,000"/"60,000"xx" 100 = 83.33%`

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

`"Gross Profit " = "Net Revenue from Operations" - "Cost of goods Sold"`

                        = `60,000 - 30,000`

                        = `30,000`

`"Gross Profit Ratio" = "30,000"/"60,000"xx" 100 = 50%`