Question

On the basis of information given below, calculate the following ratios:

1. Gross Profit Ratio
2. Debt-Equity Ratio
3. Working Capital Turnover Ratio

Information:

	₹		₹
Revenue from Operations	3,75,000	Current Assets	4,25,000
Cost of Revenue from Operations	2,50,000	Equity Share Capital	1,90,000
Current Liabilities	1,20,000	Debentures	75,000
Loan	60,000

Answer 1

(i) Gross Profit = Revenue from Operations − Cost of Revenue from Operations

= ₹ 3,75,000 − ₹ 2,50,000

= ₹ 1,25,000

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

= `(₹ 1,25,000)/(₹ 3,75,000) xx 100`

= `33 1/3%`

(ii) Long-term Debt = Debentures + Loans

= ₹ 75,000 + ₹ 60,000

= ₹ 1,35,000

Shareholder’s Funds = Equity Share Capital = ₹ 1,90,000

Debt-Equity Ratio = `"Long-term Debt"/"Shareholder’s Funds"`

= `(₹ 1,35,000)/(₹ 1,90,000)`

= 0.71 : 1

(iii) Working Capital = Current Assets – Current Liabilities

= ₹ 4,25,000 – ₹ 1,20,000

= ₹ 3,05,000

Working Capital Turnover Ratio = `"Revenue from Operations"/"Working Capital"`

= `(₹ 3,75,000)/(₹ 3,05,000)`

= 1.23 Times