1. From the following information, calculate the following ratios:
a) Liquid Ratio
b) Inventory Turnover Ratio
c) Return On Investment
Information:
CAL
Inventory in the beginning
50,000
Inventory at the end
60,000
Revenue from operations
4,00,000
Gross Profit
1,94,000
Trade Receivables
40,000
Trade Payables
1,00,000
Other Current Liabilities
1,90,000
Share Capital
70,000
Reserve and Surplus
2,00,000
Answers
Answer:
(i) Quick Ratio = Quick AssetsCurrent Liabilities
Quick Assets = Cash + Debtors
= 40,000 + 1,00,000
= 1,40,000
Current Liabilities = Creditors + Outstanding Expenses
= 190,000 + 70,000
= 260,000
Quick Ratio =
1,40,0002,60,000=7:13=0.54:1
(ii) Inventory Turnover Ratio =
cost of Revenue from OperationsAverage Inventory
Cost of Revenue from Operations = Revenue From Operations - Gross Profit
= 4,00,000 - 1,94,000
= 2,06,000
Average Inventory =
Inventory in the beinning + Inventory at the end2
= 50,000+60,0002
= 55,000
Inventory Turnover Ratio =
2,06,00055,
= 3.74 times
Return on Investment =
Profit before Interest and taxCapital Employed
x 100
Capital Employed =
Equity Share Capital + Profit and Loss
= 2,00,000 + 1,40,000
= 3,40,000
Return on Investment =
1,40,0003,40,000
= 41.17 %