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M.328 An Aid to Accountancy—CBSE XII

Credit Revenue from Operations
22. (a) Trade Receivables Turnover Ratio =
Average Trade Receivables
` 6,40,000
= = 3.2 Times.
` 2,00,000
Cost of Revenue from Operations = ` 6,00,000
Gross Profit = 1/3 of Cost = ` 2,00,000
Revenue from Operations = ` 6,00,000 + ` 2,00,000 = ` 8,00,000
Let, Credit Revenue from Operations = ` 100
Cash Revenue from Operations = ` 25
Total Revenue from Operations = ` 125

If Total Revenue is ` 125, Credit Revenue from Operations = ` 100
` 100
If Total Revenue is ` 1, Credit Revenue from Operations =
` 125
If Total Revenue is ` 8,00,000, Credit Revenue from Operations

` 100
= ¥ ` 8,00,000 = ` 6,40,000
` 125
Average Trade Receivables
Opening Trade Receivables + Closing Trade Receivables
=
2
` 2,10,000 + ` 1,90,000
= = ` 2,00,000.
2
(b) (i) No Change : Both Purchases and Closing Stock increase, as a result Cost of
Goods Sold remains unchanged.
(ii) No Change : Both Purchases and Closing Stock decrease, as a result Cost of
Goods Sold remains unchanged.
(iii) No Change : Loss on Sale of Machinery does not affect Operating Cost.
(iv) Increase : Operating Cost increases due to increase in office and selling expenses.
Or
(a) Objectives of Ratio Analysis
(i) To determine liquidity (Short-term Solvency), i.e., ability of the enterprise to
meet its short-term obligations as and when they become due.
(ii) To determine operating efficiency with which resources are utilised in
generating revenue.

Revenue from Operations
(b) Working Capital Turnover Ratio =
Working Capital
` 4,00,000
= = 20 Times
` 20,000