Question

Liquid Ratio 1.5, Current Ratio 2, Inventory Turnover Ratio 6 Times, Total Current Assets ₹ 8,00,000. Goods are sold at 20% profit on sales. Revenue from Operations will be ______.

Options

• ₹ 10,00,000

• ₹ 2,00,000

• ₹ 15,00,000

• ₹ 16,00,000

Answer 1

Liquid Ratio 1.5, Current Ratio 2, Inventory Turnover Ratio 6 Times, Total Current Assets ₹ 8,00,000. Goods are sold at 20% profit on sales. Revenue from Operations will be ₹ 15,00,000.

Explanation:

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

= `(₹ 8,00,000)/2`

= ₹ 4,00,000

Quick Assets = 1.5 × Current Liabilities

= 1.5 × ₹ 4,00,000

= ₹ 6,00,000

Inventory = Current Assets − Quick Assets

= ₹ 8,00,000 − ₹ 6,00,000

= ₹ 2,00,000

Inventory Turnover Ratio = `"Cost of Revenue from Operations"/"Average Inventory"`

Cost of Revenue from Operations = 6 × ₹ 2,00,000

= ₹ 12,00,000

Revenue from Operations = Cost of Revenue from Operations + Gross Profit

x = 12,00,000 + 20% of x

= `(₹ 12,00,000)/0.80`

= ₹ 15,00,000