Question

From the following, calculate the ‘Gross profit ratio’ and ‘working capital turnover ratio’: Revenue from operation Rs 3000000; Current Assets Rs 600000; Paid up share capital Rs 500000; Cost of revenue from operation Rs 2000000; Current liabilities Rs 200000

Answer 1

Answer:

Gross Profit Ratio = 33.33 %

Working Capital Turnover Ratio = 7.5 times

Explanation:

Solution :

Gross Profit Ratio =

$\dfrac{Gross \: Profit}{Revenue \: from \: Operation} \times 100$

Revenue from operation = Rs 30,00,000

Working Notes :

Gross Profit = Revenue from Operation - Cost of Revenue from Operation

⇒ 30,00,000 - 20,00,000

⇒ 10,00,000

Gross Profit = Rs 10,00,000

Gross Profit Ratio =

$\dfrac{Gross \: Profit}{Revenue \: from \: Operation} \times 100$

$\dfrac{ 10,00,000}{30,00,000} \times 100$

⇒ 33.33 %

Gross Profit Ratio = 33.33 %

Working Capital Turnover Ratio =

$\dfrac{Revenue \: from \: Operation}{Working \: Capital}$

Revenue from operation = Rs 30,00,000

Working Capital = Current Assets - Current Liabilities

⇒ 6,00,000 - 2,00,000

⇒ 4,00,000

Working Capital = Rs 4,00,000

$\dfrac{Revenue \: from \: Operation}{Working \: Capital}$

$\dfrac{30,00,000}{4,00,000} = 7.5$

⇒ 7.5

Working Capital Turnover Ratio = 7.5 times

∴ Gross Profit Ratio = 33.33 %

Working Capital Turnover Ratio = 7.5 times

Answer 2

Explanation:

Question:

From the following, calculate the ‘Gross profit ratio’ and ‘working capital turnover ratio’: Revenue from operation Rs 3000000; Current Assets Rs 600000; Paid up share capital Rs 500000; Cost of revenue from operation Rs 2000000; Current liabilities Rs 200000

Solution:

Gross Profit = Revenue from operation - Cost of revenue from operation

30,00,000-20,00,000

Gross profit: Rs.10,00,000

$\sf{Gross \: profit \: ratio \: = \dfrac{Gross \: profit}{Revenue \: from \: operation}} \times 100$

$\sf{gross \: profit \: ratio \: = \dfrac{1000000}{3000000}} \times 100$

Gross profit ratio = 33.33%

Working capital = Current Assets - Current liabilities

Working capital = 600000 - 200000

Working capital = Rs 4,00,000

$\sf{Working \: capital \: turnover \: ratio = \dfrac{revenue \: from \: operation}{Working \: capital}}$

30,00,000/4,00,000

7.5 times