From the following information calculate: (i) Gross Profit Ratio (ii) Inventory Turnover Ratio (iii) Current Ratio (iv) Liquid Ratio (v) Net Profit Ratio (vi) Working Capital Ratio: Revenue from Operations Rs. 25,20,000 Net Profit Rs. 3,60,000 Cost of Revenue from Operations Rs. 19,20,000 Long-term Debts Rs. 9,00,000 Trade Payables Rs. 2,00,000 Average Inventory Rs. 8,00,000 Liquid Assets Rs. 7,60,000 Fixed Assets Rs. 14,40,000 Current Liabilities Rs. 6,00,000 Net Profit before Interest and Tax Rs. 8,00,000
(i) 23.81%
(ii) 2.4 times
(iii) 2.6 : 1
(iv) 1.27 : 1
(v) 14.29%
(vi) 2.625 times
Explanation
The solution involves calculating various ratios using the specific figures provided. For the Gross Profit and Net Profit ratios, the respective profits are divided by Revenue from Operations. Liquidity and Turnover ratios are calculated using asset and liability figures. Note that Current Assets are derived by adding Liquid Assets and Average Inventory to ensure the Balance Sheet identity holds for the ratio calculations.
Solution Steps
(i) Gross Profit Ratio: Gross Profit = Revenue from Operations - Cost of Revenue from Operations = Rs. 25,20,000 - Rs. 19,20,000 = Rs. 6,00,000. Gross Profit Ratio = (Gross Profit / Revenue from Operations) × 100 = (Rs. 6,00,000 / Rs. 25,20,000) × 100 = 23.81%.
(ii) Inventory Turnover Ratio: Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory = Rs. 19,20,000 / Rs. 8,00,000 = 2.4 times.
(iii) Current Ratio: Current Assets = Liquid Assets + Average Inventory = Rs. 7,60,000 + Rs. 8,00,000 = Rs. 15,60,000. Current Ratio = Current Assets / Current Liabilities = Rs. 15,60,000 / Rs. 6,00,000 = 2.6 : 1.
(iv) Liquid Ratio: Liquid Ratio = Liquid Assets / Current Liabilities = Rs. 7,60,000 / Rs. 6,00,000 = 1.27 : 1.
(v) Net Profit Ratio: Net Profit Ratio = (Net Profit / Revenue from Operations) × 100 = (Rs. 3,60,000 / Rs. 25,20,000) × 100 = 14.29%.
(vi) Working Capital Ratio: Working Capital = Current Assets - Current Liabilities = Rs. 15,60,000 - Rs. 6,00,000 = Rs. 9,60,000. Working Capital Turnover Ratio = Revenue from Operations / Working Capital = Rs. 25,20,000 / Rs. 9,60,000 = 2.625 times.