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Compute Gross Profit Ratio, Working Capital Turnover Ratio, Debt Equity Ratio and Proprietary Ratio from the Following Information: - Accountancy

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ConceptTypes of Ratios

Question

Compute Gross Profit Ratio, Working Capital Turnover Ratio, Debt Equity Ratio and Proprietary Ratio from the following information:

 

 

Rs

Paid-up Share Capital

5,00,000

Current Assets

4,00,000

Revenue from Operations

10,00,000

13% Debentures

2,00,000

Current Liabilities

2,80,000

Cost of Revenue from Operations

6,00,000

 

Solution

`"Gross Profit ratio" = "Gross profit"/"Net Revenue from operations"xx"100`

`"Gross profit" = "Net revenue from operations" - "Cost of revenue from operations"`

                       = `10,00,000 - 6,00,000`

                       = `4,00,000`

`"Gross profit ratio" = "4,00,000"/"10,00,000"xx" 100 = 40%`

`"Working capital ratio" = "Revenue from operaions"/"working capital"`

`"working capital" = "current assets" - "Current Liablities" `

                             =`"4,00,000 - 2,80,000"`

                             = `1,20,000`

`"working capital ratio" = "10,00,000"/"1,20,000"`

                                      = `8.33 "times".`

`"Debt equity ratio" = "Debt"/"equity"`

                                 = `"2,00,000"/"5.00,000" = 2 : 5 = 0.4 : 1`

`"Proprietary Ratio"="shareholders funds"/"total assets"`

`"Total asset" = "Paid up Capital + Debentures + Current Liablities"`                                                                            

(:. `"Total Liablities = Total assets"`)

                     =`5,00,000 + 2,00,000 + 2,80,000`

                     = `9,80,000`

`"Propriertary ratio" = "5,00,000"/"9,80,000" = 25:49 = 0.51 : 1`

  Is there an error in this question or solution?

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Solution Compute Gross Profit Ratio, Working Capital Turnover Ratio, Debt Equity Ratio and Proprietary Ratio from the Following Information: Concept: Types of Ratios.
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