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# Calculate the following ratio on the basis of following information: (i) Gross Profit Ratio (ii) Current Ratio (iii) Acid Test Ratio (iv) Inventory Turnover Ratio (v) Fixed Assets Turnover Ratio - Accountancy

ConceptTypes of Ratios

#### Question

Calculate the following ratio on the basis of following information:
(i) Gross Profit Ratio (ii) Current Ratio (iii) Acid Test Ratio (iv) Inventory Turnover Ratio (v) Fixed Assets Turnover Ratio

 Rs. Gross Profit 50,000 Revenue from Operations 100,000 Inventory 15,000 Trade Receivables 27,500 Cash and Cash Equivalents 17,500 Current Liabilities 40,000 Land & Building 50,000 Plant & Machinery 30,000 Furniture 20,000

#### Solution

(i) Gross Profit Ratio = "Gross Profit"/"Revenue From Operations" x 100
= [50,000]/[100,000] x 100 = 50 %

(ii) Current Ratio = "Current Assets"/"Current Liabilities"

Current Assets  = Inventory + Trade Receivables + Cash and Cash Equivalents
= 15,000 + 27,500 + 17,500
= 60,000
Current Ratio = [60,000]/[40,000] = 1.5 : 1.

(iii) Acid Test Ratio = "Liquid Assets"/"Current liabilities"

Liquid Assets = Current Assets - Inventory
= 60,000 - 15,000
= 45,000
Acid Test Ratio = [45,000]/[40,000] = 1.125 : 1

(iv) Inventory Turnover Ratio = "Cost of Revenue from Operations"/"Average Inventory"

Cost of Revenue from Operations = Revenue from Operations - Gross Profit                                              = 1,00,000 - 50,000
= 50,000

Average Inventory = 15,000*
*Note: Since values for inventory in the beginning and inventory at the end is not given, the amount of inventory is assumed to be average inventory.
Inventory Turnover Ratio = [50,000]/[15,000] = 3.33 times

(v) Fixed Assets Turnover Ratio = "Revenue from Operations"/"Net Fixed Assets"

Net Fixed Assets = Land & Building + Plant and Machinery + Furniture
= 50,000 + 30,000 + 20,000
= 100,000

Fixed Assets Turnover Ratio = [100,000]/[100,000] = 1 : 1

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Solution Calculate the following ratio on the basis of following information: (i) Gross Profit Ratio (ii) Current Ratio (iii) Acid Test Ratio (iv) Inventory Turnover Ratio (v) Fixed Assets Turnover Ratio Concept: Types of Ratios.
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