Page 71 - MA12

4.16 Management Accounting (Section B)—ISC XII

II. ASSETS
1. Non-Current Assets
Fixed Assets (Tangible) 7,20,000
2. Current Assets
(a) Inventories 80,000
(b) Trade Receivables 1,20,000
(c) Cash and Bank Balances 60,000
(d) Other Current Assets (Prepaid Expenses) 5,000
Total 9,85,000
(ISC 2007, Modified)
Solution:

Quick Assets (Note 1)
(i) Quick Ratio =
Current Liabilities (Note 2)

` 1,80,000
= = 7.5 : 1.
` 24,000
Note: Quick Assets = Trade Receivables + Cash and Bank Balances
= ` 1,20,000 + ` 60,000 = ` 1,80,000.

Gross Profit
(ii) Gross Profit Ratio = ¥ 100
Revenue from Operations

` 3,30,000
= ¥ 100 = 66%.
` 5,00,000
Gross Profit = Revenue from Operations – Cost of Revenue from Operations
= ` 5,00,000 – (` 2,00,000 – ` 30,000) = ` 3,30,000.
Note: Direct Expenses are taken as Nil since no information is available.

(iii) Inventory Turnover Ratio
Cost of Revenue from Operations (Cost of Goods Sold) (Note 1)
=
Average Inventory (Note 2)

` 1,70,000
= = 2.62 Times.
` 65,000
Notes: 1. Cost of Revenue from Operations (Cost of Goods Sold)
= Purchases of Stock-in-Trade + Change in Inventories of
Stock-in-Trade
= ` 2,00,000 – ` 30,000 = ` 1,70,000.

Opening Inventory + Closing Inventory
2. Average Inventory =
2
` 50,000 + ` 80,000
= = ` 65,000.
2