Page 87 - MA12

4.32 Management Accounting (Section B)—ISC XII

Notes:
1. Credit Revenue from Operations = Revenue from Operations – Cash Revenue from Operations
= ` 20,00,000 – ` 4,00,000 = ` 16,00,000.
2. In the absence of Opening Trade Receivables, Closing Trade Receivables have been used in the
above formula.
3. Provision for Doubtful Debts is not deducted from the amount of Trade Receivables while calculating
Trade Receivables Turnover Ratio.
Net Credit Purchases
(i) Trade Payables Turnover Ratio =
Average Trade Payables
` 17,80,000
= = 8.9 Times.
` 2,00,000
Notes:
1. In the absence of any information regarding Opening Trade Payables, Closing Trade Payables have
been used.
2. It has been assumed that all purchases are on credit.
Revenue from Operations
(j) Working Capital Turnover Ratio =
Working Capital

` 20,00,000
=
` 16,00,000 (CA) -` 8,00,000 (CL)
` 20,00,000
= = 2.5 Times.
` 8,00,000
Gross Profit
(k) Gross Profit Ratio = ¥ 100
Revenue from Operations
` 8,00,000
= ¥ 100 = 40%.
` 20,00,000
Note: Gross Profit = Revenue from Operations – Cost of Revenue from Operations
= ` 20,00,000 – ` 12,00,000 = ` 8,00,000.

Net Profit ` 2,40,000
(l) Net Profit Ratio = ¥ 100 = ¥ 100 = 12%.
Revenue from Operations ` 20,00,000
Note: Net Profit = Gross Profit + Other Income – Indirect Expenses – Tax
= ` 8,00,000 + NIL – [` 2,00,000 (Operating Expenses)
+ ` 1,20,000 (Interest on Debentures: Non-Operating Expenses)] – ` 2,40,000
= ` 2,40,000.

Cost of Revenue from Operations + Operating Expenses
(m) Operating Ratio = ¥ 100
Revenue from Operations
` 12,00,000 + ` 2,00,000
= ¥ 100 = 70% .
` 20,00,000