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Calculate Revenue from Operations of Bn Ltd. from the Following Information: - Accountancy

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Sum

Calculate Revenue from operations of BN Ltd. From the following information:

Current assets ₹ 8,00,000.
Quick ratio is 1.5: 1
Current ratio is 2: 1
Inventory turnover ratio is 6 times.

Goods were sold at a profit of 25% on cost.

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Solution

Gross Profit = Revenue from Operations – Cost of Goods Sold
Current Assets =  8,00,000

Current Ratio  = `"Current Assets"/"Current Liabilties"`

`2/1 = (8,00,000)/ "Current Liabilities"`

Current Liabilities =  `(8,00,000)/2` =  ₹ 4,00,000

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

`1.5/1 = "Quick Assets"/(4,00,000)`

Quick Assets = ₹ 6,00,000

Stock = Current Assets – Quick Assets = ₹ (8,00,000 – 6,00,000) = ₹ 2,00,000

Inventory turnover Ratio = `"Cost of Goods Sold"/"Average Stock"`

`6 = "Cost of Goods Sold"/(2,00,000)`

Cost of Goods Sold = 6 × 2,00,000 = ₹ 12,00,000

Gross Profit = 12,00,000 × `25/100` = ₹ 3,00,000

Revenue from Operations = Cost of Goods Sold + Gross Profit 
= ₹ ( 12,00,000 + 3,00,000)
= ₹ 15,00,000

Concept: Activity Ratios - Inventory Turnover Ratio
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