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Question
Calculate Operating Profit Ratio,in each of the following alternative cases:
Case 1: Revenue from Operations (Net Sales) ₹ 10,00,000; Operating Profit ₹ 1,50,000.
Case 2: Revenue from Operations (Net Sales) ₹ 6,00,000; Operating Cost ₹ 5,10,000.
Case 3: Revenue from Operations (Net Sales) ₹ 3,60,000; Gross Profit 20% on Sales; Operating Expenses ₹ 18,000
Case 4: Revenue from Operations (Net Sales) ₹ 4,50,000; Cost of Revenue from Operations ₹ 3,60,000; Operating Expenses ₹ 22,500.
Case 5: Cost of Goods Sold, i.e., Cost of Revenue from Operations ₹ 8,00,000; Gross Profit 20% on Sales; Operating Expenses ₹ 50,000.
Solution
Case 1
Operating Profit Ratio = `"Operating Profit"/"Net Sales" xx 100`
`= 150000/1000000 xx 100 = 15%`
Case II
Operating Profit = Net Sales - Operating Cost
= 600000 - 510000 = 90000
Operating Profit Ratio = `"Operating Profit"/"Net Sales" xx 100`
`= 90000/600000 xx 100 = 15%`
Case III
Net Sales = 3,60,000
Gross Profit = 20% on Sales
Gross Profit =`20/100 xx 360000 = 72000`
Operating Profit = Gross Profit - Operating Expenses
= 72000 - 18000 = 54000
Operating Profit ratio = `"Operating Profit"/"Net Sales" xx 100`
`= 54000/360000 xx 100 = 15 %`
Case IV
Net Sales = 4,50,000
Operating Profit = Net Sales - Cost of Goods Sold - Operating Expenses
= 450000 - 360000 - 22500 = 67500
Operating Profit Ratio = `"Operating Profit"/"Net Sales" xx 100`
`= 67500/450000 xx 100 = 15 %`
Case V
Gross Profit = 20% on Sales
Let Sales = x
∴ Gross Profit = `x xx 20/100 = (20x)/100
Sales = Cost Goods Sold + Gross Profit
`x = 800000 + (20x)/100`
or,`(80x)/100 = 800000`
or, x = 1000000
∴ Sales = 1000000
Operating Cost = Cost of Goods Sold + Operating Expenses
= 800000 + 50000 = 850000
Operating Profit = Net Sales - Cost of goods Sold - Operating Expenses
= 1000000 - 800000 - 50000 = 150000
Operating Profit Ratio = `"Operating Profit"/"Net Sales" xx 100`
`= 150000/1000000 xx 100 = 15%`
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RELATED QUESTIONS
Compute Stock Turnover Ratio from the following information:
|
|
Rs |
|
Net Revenue from Operations |
2,00,000 |
|
Gross Profit |
50,000 |
|
Inventory at the end |
60,000 |
|
Excess of inventory at the end over inventory in the beginning |
20,000 |
Total Assets ₹22,00,000; Fixed Assets ₹10,00,000; Capital Employed ₹20,00,000. There were no Long-term Investments.
Calculate Current Ratio.
From the following calculate: (i) Current Ratio; and (ii) Quick Ratio:
| ₹ | ₹ | ||
| Total Debt | 6,00,000 | Long-term Borrowings | 2,00,000 |
| Total Assets | 8,00,000 | Long-term Provisions | 2,00,000 |
| Fixed Assests (Tangible) | 3,00,000 | Inventories | 95,000 |
| Non-current Investment | 50,000 | Prepaid Expenses | 5,000 |
| Long-term Loans and Advances | 50,000 |
₹2,00,000 is the Cost of Revenue from Operations (Cost of Goods Sold), during the year. If Inventory Turnover Ratio is 8 times, calculate inventories at the end of the year. Inventories at the end is 1.5 times that of in the beginning.
From the following information, determine Opening and Closing inventories:
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From the following Statement of Profit and Loss for the year ended 31st March, 2019 of Rex Ltd., calculate Inventory Turnover Ratio:
STATEMENT OF PROFIT AND LOSS
for the year ended 31st March, 2019
|
Particulars |
Note No. |
Amount (₹) |
| I. Revenue from Operations (Net Sales) |
6,00,000 |
|
| II. Expenses: | ||
|
(a) Purchases of Stock-in-Trade |
3,00,000 |
|
|
(b) Change in Inventory of Stock-in-Trade |
1 |
50,000 |
|
(c) Employees Benefit Expenses |
60,000 |
|
|
(d) Other Expenses |
2 |
45,000 |
| Total Expenses |
4,55,000 |
|
| III. Profit before Tax (I-II) |
1,45,000 |
|
| IV. Less: Tax |
45,000 |
|
| V. Profit after Tax (III-IV) |
1,00,000 |
Notes to Accounts
|
Particulars |
Amount (₹) |
| I. Change in Inventory of stock-in-Trade | |
|
Opening Inventory |
1,25,000 |
|
Less: Closing Inventory |
75,000 |
|
50,000 |
|
| 2. Other Expenses | |
|
Carriage Inwards |
15,000 |
|
Miscellaneous Expenses |
30,000 |
|
45,000 |
Closing Trade Receivables ₹ 1,00,000; Cash Sales being 25% of Credit Sales; Excess of Closing Trade Receivables over Opening Trade Receivables ₹ 40,000; Revenue from Operations, i.e., Net Sales ₹ 6,00,000. Calculate Trade Receivables Turnover Ratio.
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- Average Trade Receivables;
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| ₹ | |
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| Cost of Revenue from Operations | 9,00,000 |
| Operating Expenses | 15,000 |
| Inventory | 20,000 |
| Other Current Assets | 2,00,000 |
| Current Liabilities | 75,000 |
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| Statement of Profit and Loss (Dr.) | 47,500 |
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| Cost of Revenue from Operations | 9,00,000 |
| Operating Expenses | 15,000 |
| Inventory | 20,000 |
| Other Current Assets | 2,00,000 |
| Current Liabilities | 75,000 |
| aid up Share Capital | 4,00,000 |
| Statement of Profit and Loss (Dr.) | 47,500 |
| Total Debt | 2,50,000 |
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| Prepaid Expenses | 3,00,000 | 2,50,000 | 3,50,000 |
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| Gross Profit Ratio | 12% | 15% | 18% |
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