Question

From the following information, calculate Operating Ratio and Quick Ratio.

Revenue from operations Rs 3,00,000; Opening Inventory Rs 10,000; Purchases Rs 1,20,000; Wages Rs 30,000 ; Closing Inventory Rs 30,000; Selling and Distribution Expenses Rs 10,000; Currnet Assets Rs 2,00,000 and Current Liabilities Rs 1,20,000.

Answer 1

Operating Ratio =$\frac{\text{(Cost of revenue from operations + Operating expenses)}}{\text{Revenue from operations}}\times 100$

=$\frac{(1,20,000+10,000+30,000-30,000+10,000)}{3,00,000}\times 100$

=$\frac{1,40,000}{3,00,000}\times 100=46.67\%$

Quick ratio=$\frac{\text{Quick Assets}}{\text{Current liabilities}}$

Quick asset=Current Assets -Closing inventory

$=2,00,000-30,000$

$=Rs1,70,000$

Quick ratio = $\frac{1,70,000}{1,20,000}=1.42:1$