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 %
