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Ratio Analysis 4.17
(iv) Operating Ratio

Cost of Revenue from Operations (Cost of Goods Sold)* + Operating Expenses**
= ¥ 100
Revenue from Operations
` 1,70,000 1,00,000+ ` ` 2,70,000
= ¥ 100 = ¥ 100 = 54%.
` 5,00,000 ` 5,00,000
*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
**Operating Expenses = Employees Benefit Expenses + Other Expenses
(Administrative Expenses + Selling Expenses)
= ` 50,000 + ` 20,000 + ` 30,000 = ` 1,00,000.
Debt (Long-term Debt)
(v) Debt to Equity Ratio =
Equity [Shareholders’ Funds]
` 1,50,000
= = 0.18 : 1.
` 8,11,000
Notes: 1. Debt/Long-term Debt = Long-term Borrowings + Long-term Provisions
= ` 1,40,000 + ` 10,000 = ` 1,50,000.
2. Shareholders’ Funds = Share Capital + Reserves and Surplus
= ` 7,00,000 + ` 1,11,000 = ` 8,11,000.

Illustration 13.
Calculate following ratios from the Financial Statements of Annie Foods Limited:
(i) Gross Profit Ratio; (ii) Net Profit Ratio;
(iii) Working Capital Turnover Ratio; (iv) Inventory Turnover Ratio;
(v) Quick Ratio; (vi) Proprietary Ratio;
(vii) Current Ratio.

STATEMENT OF PROFIT AND LOSS OF ANNIE FOODS LIMITED for the year ended 31st March, 2019
Particulars Note No. `
I. Income
Revenue from Operations (Net Sales) 68,000
Other Income 1,000
Total 69,000
II. Expenses
Purchases of Stock-in-Trade 28,000
Change in Inventories of Stock-in-Trade 1 (10,000)
Finance Cost 5,000
Other Expenses 2 21,000
Total 44,000

III. Net Profit (I – II) 25,000