Page 74 - MA12

Ratio Analysis 4.19
Cost of Revenue from Operations (Cost of Goods Sold)
= Purchases of Stock-in-Trade + Change in Inventories of Stock-in-Trade
Gross Profit = ` 68,000 – ` 18,000 = ` 50,000.

Net Profit
(ii) Net Profit Ratio = × 100
Revenue from Operations
` 25,000
= × 100 = 36.76%.
` 68,000
Revenue from Operations
(iii) Working Capital Turnover Ratio =
Working Capital (Note)
` 68,000
= = 1.05 Times.
` 65,000
Working Capital = Total Current Assets – Total Current Liabilities.

Note: Calculation of Working Capital:
Current Assets ` Current Liabilities `
Inventory 40,000 Trade Payables 30,000
Trade Receivables 20,000
Cash and Bank Balances 35,000
95,000 30,000
Working Capital = ` 95,000 – ` 30,000 = ` 65,000.

Cost of Revenue from Operations (Cost of Goods Sold)
(iv) Inventory Turnover Ratio =
Average Inventory
` 18,000
= = 0.51 Times.
` 35,000
Cost of Revenue from Operations (Cost of Goods Sold)
= Purchases of Stock-in-Trade + Change in Inventories
of Stock-in-Trade
= ` 28,000 – ` 10,000 = ` 18,000

Opening Inventory + Closing Inventory
Average Inventory =
2
` 30,000 + 40,000`
= = ` 35,000.
2
Quick Assets ` 55,000
(v) Quick Ratio = = = 1.83 : 1.
Current Liabilities ` 30,000
Quick Assets = Total Current Assets – Closing Inventory
= ` 95,000 – ` 40,000 = ` 55,000