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Working Capital Turnover Ratio

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Question

Calculate Gross Profit Ratio from the following data:
Average Inventory ₹3,20,000; Inventory Turnover Ratio 8 Times; Average Trade Receivables ₹4,00,000; Trade Receivables Turnover Ratio 6 Times; Cash Sales 25% of Net Sales.

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Solution

Inventory Turnover Ratio = 8 times
Average Inventory = Rs 3,20,000

Cost of Goods sold = 25,60,000
Trade Receivables Turnover Ratio = 6 times
Average Trade Receivables = Rs 4,00,000

Net Credit Sales = 24,00,000
Total Sales = Cash Sales + Credit Sales
Total Sales = 25% of Total Sales + Credit Sales
75% of Total Sales = 24,00,000

Gross Profit = Total Sales – Cost of Goods Sold
= 32,00,000 – 25,60,000 = 6,40,000

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Q. (i) Revenue from Operations: Cash Sales ₹4,20,000; Credit Sales ₹6,00,000; Return ₹20,000. Cost of Revenue from Operations or Cost of Goods Sold ₹8,00,000. Calculate Gross Profit Ratio.
(ii) Average Inventory ₹1,60,000; Inventory Turnover Ratio is 6 Times; Selling Price 25% above cost. Calculate Gross Profit Ratio.
(iii) Opening Inventory ₹1,00,000; Closing Inventory ₹60,000; Inventory Turnover Ratio 8 Times; Selling Price 25% above cost. Calculate Gross Profit Ratio.

From the following information calculate Gross Profit Ratio, Inventory Turnover Ratio and Trade Receivables Turnover Ratio.

	Rs
Revenue from Operations	3,00,000
Cost of Revenue from Operations	2,40,000
Inventory at the end	62,000
Gross Profit	60,000
Inventory in the beginning	58,000
Trade Receivables	32,000

Q. Following information is given about a company:

	₹			₹
Revenue From Operations, i.e., Net Sales Gross Profit	1,50,000		Opening Inventory	29,000
Cost of Revenue From Operations	30,000		Closing Inventory	31,000
(Cost of Goods Sold)	1,20,000		Debtors	16,000

From the above information, calculate following ratios:

(i) Gross Profit Ratio,

(ii) Inventory Turnover Ratio, and

(iii) Trade Receivables Turnover Ratio.

Q. Calculate Trade Receivables Turnover Ratio in each of the following alternative cases:
Case 1: Net Credit Sales ₹4,00,000; Average Trade Receivables ₹1,00,000.
Case 2: Revenue from Operations (Net Sales) ₹30,00,000; Cash Revenue from Operations, i.e., Cash Sales ₹6,00,000; Opening Trade Receivables ₹2,00,000; Closing Trade Receivables ₹6,00,000.
Case 3: Cost of Revenue from Operations or Cost of Goods Sold ₹3,00,000; Gross Profit on Cost 25%; Cash Sales 20% of Total Sales; Opening Trade Receivables ₹50,000; Closing Trade Receivables ₹1,00,000.
Case 4: Cost of Revenue from Operations or Cost of Goods Sold ₹4,50,000; Gross Profit on Sales 20%; Cash Sales 25% of Net Credit Sales, Opening Trade Receivables ₹90,000; Closing Trade Receivables ₹60,000.

Q. Calculate Inventory Turnover Ratio from the following:

	₹
Opening Inventory	29,000
Closing Inventory	31,000
Revenue from Operations, i.e., Sales	3,20,000
Gross Profit Ratio 25%

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