Question

From the following information, calculate (up to two decimal places):

(1) Trade Receivables Turnover Ratio

(2) Operating Profit Ratio

(3) Net Profit Ratio

Particulars	₹
Cash Revenue from Operations	1,00,000
Net Purchases	2,97,000
Credit Revenue from Operations	3,00,000
Closing Debtors	80,000
Closing Bills Receivables	60,000
Carriage Inward	3,000
Finance Cost	5,000
Administrative Expenses	40,000
Profit on sale of fixed asset	10,000
Discount Received	7,000

Answer 1

(1) Trade Receivables Turnover Ratio = `("Credit Revenue from Operations")/("Average Trade Receivables")`

Average Trade Receivables = Closing Debtors + Closing Bills Receivables

= 80,000 + 60,000

= ₹ 1,40,000

Trade Receivables Turnover Ratio = `(3,00,000)/(1,40,000)`

= 2.14 times

(2) Operating Profit Ratio = `("Operating Profit")/("Revenue from Operations") xx 100`

(i) Revenue from Operations = Cash Revenue from Operations + Credit Revenue from Operations

= 1,00,000 + 3,00,000

= ₹ 4,00,000

(ii) Operating Profit = Revenue from Operations − Net Purchases − Carriage Inward − Administrative Exp. + Discount received

= 4,00,000 − 2,97,000 − 3,000 − 40,000 + 7,000

= ₹ 67,000

Operating Profit Ratio = `(67,000)/(4,00,000) xx 100`

= 16.75%

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

Net Profit = Operating Profit − Non Operating Expenses + Net Operating Incomes

= Operating Profit − Finance Cost + Profit on Sale of Fixed Asset

= 67,000 − 5,000 + 10,000

= ₹ 72,000

Net Profit Ratio = `(72,000)/(4,00,000) xx 100`

= 18%