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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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