Question

The following information is given about a company:

	₹
Revenue from Operations	1,50,000
Gross Profit	30,000
Operating Exp.	7,500
Opening Inventory	29,000
Closing Inventory	31,000
Trade Receivables	16,000
Non-Current Assets	1,10,000

From the above information, calculate the following ratios:

1. Gross Profit Ratio
2. Operating Ratio
3. Inventory Turnover Ratio
4. Trade Receivables Turnover Ratio

Answer 1

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

= `(₹ 30,000)/(₹ 1,50,000) xx 100`

= 20 %

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

= ₹ 1,50,000 − ₹ 30,000

= ₹ 1,20,000

Operating Ratio = `"Cost of Revenue from Operations + Operating Expenses"/"Revenue from Operations" xx 100`

= `(₹ 1,20,000  + ₹ 7,500)/(₹ 1,50,000) xx 100`

= `(₹ 1,27,500)/(₹ 1,50,000) xx 100`

= 85%

(iii) Average Inventory = `("Opening Inventory" + "Closing Inventory")/2`

= `(₹ 29,000  + ₹ 31,000)/2`

= `(₹ 60,000)/2`

= ₹ 30,000

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

= `(₹ 1,20,000)/(₹ 30,000)`

= 4 Times

(iv) Credit Revenue from Operations = Revenue from Operations = ₹ 1,50,000

Average Trade Receivables = Trade Receivables = ₹ 16,000

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

= `(₹ 1,50,000)/(₹ 16,000)`

= 9.375 Times