Share
Notifications

View all notifications

Uestion 18: from the Following Information, Calculate the Following Ratios: I) Quick Ratio Ii) Inventory Turnover Ratio Iii) Return on Investment - Accountancy

Login
Create free account


      Forgot password?
ConceptTypes of Ratios

Question

From the following information, calculate the following ratios:
i) Quick Ratio
ii) Inventory Turnover Ratio
iii) Return on Investment

  Rs.
Inventory in the beginning 50,000
Inventory at the end 60,000
Revenue from operations 4,00,000
Gross Profit 1,94,000
Cash and Cash Equivalents 40,000
Trade Receivables 1,00,000
Trade Payables 1,90,000
Other Current Liabilities 70,000
Share Capital 2,00,000
Reserves and Surplus 1,40,000

(Balance in the Statement of Profit & Loss A/c)

Solution

(i) Quick Ratio = `"Quick Assets"/"Current Liabilities"`

Quick Assets = Cash + Debtors
= 40,000 + 1,00,000
= 1,40,000
Current Liabilities = Creditors + Outstanding Expenses
= 190,000 + 70,000
= 260,000

Quick Ratio = `[1,40,000]/[2,60,000] = 7 : 13 = 0.54 : 1`

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

Cost of Revenue from Operations = Revenue From Operations - Gross Profit
= 4,00,000 - 1,94,000
= 2,06,000

Average Inventory = `"Inventory in the beinning + Inventory at the end"/2`
= `[50,000 + 60,000]/2`

= 55,000

Inventory Turnover Ratio = `[2,06,000]/[55,000]` = 3.74 times

Return on Investment = `"Profit before Interest and tax"/"Capital Employed"` x 100
Capital Employed = `"Equity Share Capital + Profit and Loss"`
= 2,00,000 + 1,40,000
= 3,40,000

Return on Investment = `[1,40,000]/[3,40,000] xx 100` = 41.17 % 

  Is there an error in this question or solution?

APPEARS IN

Solution Uestion 18: from the Following Information, Calculate the Following Ratios: I) Quick Ratio Ii) Inventory Turnover Ratio Iii) Return on Investment Concept: Types of Ratios.
S
View in app×