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Question
Calculate Trade Payables Turnover Ratio for the year 2018-19 in each of the alternative cases:
Case 1 : Closing Trade Payables ₹ 45,000; Net Purchases ₹ 3,60,000; Purchases Return ₹ 60,000; Cash Purchases ₹ 90,000.
Case 2 : Opening Trade Payables ₹ 15,000; Closing Trade Payables ₹ 45,000; Net Purchases ₹ 3,60,000.
Case 3 : Closing Trade Payables ₹ 45,000; Net Purchases ₹ 3,60,000.
Case 4 : Closing Trade Payables (including ₹ 25,000 due to a supplier of machinery) ₹ 55,000; Net Credit Purchases ₹ 3,60,000.
Solution
Case 1
Net Credit Purchases = Net Purchases − Cash Purchases
= 3,60,000 − 90,000 = 2,70,000
Trade Payables Turnover Ratio = `"Net Credit Purchases"/"Closing Trade Payables"`
`= 270000/45000` = 6 times
Case 2
Net Purchases = 3,60,000
Average Trade Payables = `("Opening Trade Payables + Closing Trade Payables")/2`
`= (15000 + 45000)/2 = 30000`
Trade Payables Turnover Ratio = `"Net Credit Purchases"/"Average Trade Payables" = 360000/30000` = 12 times
Case 3
Trade Payable Turnover Ratio =
`"Net Credit Purchases"/"Average Trade Payables" = 360000/45000 = 8 "times"`
Case 4
Net Credit Payables for Goods = Trade Payables − Creditors for Machinery
= 55,000 − 25,000 = 30,000
Trade Payable Turnover Ratio = `"Net Credit Purchases"/"Average Trade Payables" = 360000/30000` = 12 times
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RELATED QUESTIONS
Following is the Balance Sheet of Raj Oil Mills Limited as at March 31, 2017. Calculate Current Ratio.
| Particulars | (Rs) |
| I. Equity and Liabilities: | |
|
1. Shareholders’ funds |
|
|
a) Share capital |
7,90,000 |
|
b) Reserves and surplus |
35,000 |
|
2. Current Liabilities |
|
|
a) Trade Payables |
72,000 |
| Total | 8,97,000 |
| II. Assets | |
|
1. Non-current Assets |
|
|
a) Fixed assets |
|
|
Tangible assets |
7,53,000 |
|
2. Current Assets |
|
|
a) Inventories |
55,800 |
|
b) Trade Receivables |
28,800 |
|
c) Cash and cash equivalents |
59,400 |
| Total | 8,97,000 |
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 |
Total Debt ₹12,00,000; Current Liabilities ₹4,00,000; Capital Employed ₹`12,00,000. Calculate Total Assets to Debt Ratio.
From the following infromation, calculate Proprietary Ratio:
|
|
₹ |
| Equity Share Capital | 3,00,000 |
| Preference Share Capital | 1,50,000 |
| Reserves and Surplus | 75,000 |
| Debentures | 1,80,000 |
|
Trade Payables |
45,000 |
|
|
7,50,000 |
|
Fixed Assets |
3,75,000 |
| Short-term Inverstments | 2,25,000 |
|
Other Current Assets |
1,50,000 |
|
|
7,50,000 |
From the following information, calculate Interest Coverage Ratio: Profit after Tax ₹1,70,000; Tax ₹30,000; Interest on Long-term Funds ₹50,000.
From the following information, calculate Interest Coverage Ratio:
| ₹ | |
| 10,000 Equity Shares of ₹10 each | 1,00,000 |
| 8% Preference Shares | 70,000 |
| 10% Debentures | 50,000 |
| Long-term Loans from Bank | 50,000 |
| Interest on Long-term Loans from Bank | 5,000 |
| Profit after Tax | 75,000 |
| Tax | 9,000 |
Calculate Operating Ratio from the following information:
Operating Cost ₹ 6,80,000; Gross Profit 25%; Operating Expenses ₹ 80,000.
Operating Cost ₹ 3,40,000; Gross Profit Ratio 20%; Operating Expenses ₹ 20,000. Calculate Operating Profit Ratio.
From the following information, calculate Inventory Turnover Ratio; Operating Ratio and Working Capital Turnover Ratio:
Opening Inventory ₹ 28,000; Closing Inventory ₹ 22,000; Purchases ₹ 46,000; Revenue from Operations, i.e., Net Sales ₹ 80,000; Return ₹10,000; Carriage Inwards ₹ 4,000; Office Expenses ₹ 4,000; Selling and Distribution Expenses ₹ 2,000; Working Capital ₹ 40,000.
Which items are included in current assets to get the current ratio?
Items excluded in liquid assets are:
Liquidity ratios includes which two types of ratios?
Quick Ratio can be calculated as ______?
State giving reasons which of the following transactions would improve, reduce and not change the current ratio
The current ratio is 2:1
"Repayment of current liability"
Debt Ratio can be calculated as ______?
Investment (Net Assets) Turnover Ratio can be calculated as ______?
The primary concern of creditors when assessing the strength of a firm is the firm's ______
Liquid ratio is also known as ______.
Which of the following measures the firm's ability to meet its long-term obligations?
Which one of the following is correct?
- Quick Ratio can be more than Current Ratio.
- High Inventory Turnover ratio is good for the organisation, except when goods are bought in small lots or sold quickly at low margins to realise cash.
- Sum of Operating Ratio and Operating Profit ratio is always 100%.
