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

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?

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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.
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