Question

Calculate following ratios on the basis of the following information:
(i) Gross Profit Ratio;
(ii) Current Ratio;
(iii) Acid Test Ratio; and
(iv) Inventory Turnover Ratio.

	₹			₹
Gross Profit	50,000		Revenue from Operations	1,00,000
Inventory	15,000		Trade Receivables	27,500
Cash and Cash Equivalents	17,500		Current Liabilities	40,000

Answer 1

$\begin{array}{l}\mathrm{Gross}\mathrm{Profit}\mathrm{Ratio}=\frac{\mathrm{Gross}\mathrm{Profit}}{\mathrm{Revenue}\mathrm{from}\mathrm{Operations}}\times 100\\ \mathrm{Gross}\mathrm{Profit}\mathrm{Ratio}=\frac{50,000}{1,00,000}\times 100=50\%\\ \mathrm{Current}\mathrm{Ratio}=\frac{\mathrm{Current}\mathrm{Assets}}{\mathrm{Current}\mathrm{Liabilities}}\\ \mathrm{Current}\mathrm{Ratio}=\frac{\mathrm{Inventory}+\mathrm{Cash}\mathrm{and}\mathrm{Cash}\mathrm{Equivalents}+\mathrm{Trade}\mathrm{Receivables}}{\mathrm{Current}\mathrm{Liabilities}}\\ \mathrm{Current}\mathrm{Ratio}=\frac{15,000+17,500+27,500}{40,000}=1.5:1\\ \mathrm{Liquid}\mathrm{Ratio}=\frac{\mathrm{Liquid}\mathrm{Assets}}{\mathrm{Current}\mathrm{Liabilities}}\\ \mathrm{Liquid}\mathrm{Ratio}=\frac{\mathrm{Cash}\mathrm{and}\mathrm{Cash}\mathrm{Equivalents}+\mathrm{Trade}\mathrm{Receivables}}{\mathrm{Current}\mathrm{Liabilities}}\\ \mathrm{Liquid}\mathrm{Ratio}=\frac{17,500+27,500}{40,000}=1.125:1\\ \mathrm{Inventory}\mathrm{Turnover}\mathrm{Ratio}=\frac{\mathrm{Cost}\mathrm{of}\mathrm{Goods}\mathrm{Sold}}{\mathrm{Average}\mathrm{Stock}}\\ \mathrm{Inventory}\mathrm{Turnover}\mathrm{Ratio}=\frac{\mathrm{Revenue}\mathrm{from}\mathrm{Operations}-\mathrm{Gross}\mathrm{Profit}}{\mathrm{Average}\mathrm{Stock}}\\ \mathrm{Inventory}\mathrm{Turnover}\mathrm{Ratio}=\frac{1,00,000-50,000}{15,000}=3.33\mathrm{times}\end{array}$