Page 62 - MA12

Ratio Analysis 4.7
Solution:
Gross Profit ` 2,00,000
(i) Gross Profit Ratio = ¥ 100 = ¥ 100 = 40%.
Revenue from Operations ` 5,00,000
Gross Profit = Revenue from Operations – Cost of Revenue from Operations
(Cost of Goods Sold)
= ` 5,00,000 – ` 3,00,000 = ` 2,00,000.
(ii) Working Capital Turnover Ratio

Revenue from Operations ` 5,00,000
= = = 8.33 Times.
Working Capital ` 60,000

Working Capital = Current Assets – Current Liabilities
= ` 2,00,000 – ` 1,40,000 = ` 60,000.

Shareholders’ Funds ` 2,50,000
(iii) Proprietary Ratio = = = 0.51 : 1.
Total Assets ` 4,90,000 (WN)
Working Note:
Total Assets = Paid-up Share Capital + 13% Debentures + Current Liabilities
= ` 2,50,000 + ` 1,00,000 + ` 1,40,000 = ` 4,90,000.
Illustration 3.
From the following information, calculate: (i) Gross Profit Ratio, (ii) Current Ratio,
(iii) Working Capital Turnover Ratio, (iv) Inventory Turnover Ratio and (v) Quick Ratio:
`
Revenue from Operations 30,00,000
Cost of Revenue from Operations (Cost of Goods Sold) 20,00,000
Current Assets 6,00,000
Current Liabilities 2,00,000
Average Inventory (excluding Loose Tools and Spare Parts) 2,00,000
Prepaid Expenses 30,000
Solution:
Gross Profit ` 10,00,000
(i) Gross Profit Ratio = ¥ 100 = ¥ 100 = 33.33%.
Revenue from Operations ` 30,00,000
Gross Profit = Revenue from Operations – Cost of Revenue from Operations
= ` 30,00,000 – ` 20,00,000 = ` 10,00,000.

Current Assets ` 6,00,000
(ii) Current Ratio = = = 3 :1.
Current Liabilities ` 2,00,000
Revenue fromOperations ` 30,00,000
(iii) Working Capital Turnover Ratio = = = 7.5 Times.
Working Capital ` 4,00,000

Working Capital = Current Assets – Current Liabilities
= ` 6,00,000 – ` 2,00,000 = ` 4,00,000.