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Question
From the following information calculate Gross Profit Ratio, Inventory Turnover Ratio and Trade Receivables Turnover Ratio.
| Rs | |
| Revenue from Operations | 3,00,000 |
| Cost of Revenue from Operations | 2,40,000 |
| Inventory at the end | 62,000 |
| Gross Profit | 60,000 |
| Inventory in the beginning | 58,000 |
| Trade Receivables | 32,000 |
Solution
Gross Profit Ratio = `" Gross Profit"/"Net Revenue from Operations"` x 100
Gross Profit = Net Revenue from Operations - Cost of Revenue from Operations
= 3,00,000 - 2,40,000
= 60,000
Gross Profit Ratio = `[60,000]/[3,00,000]` x 100 = 20 %
Inventory Turnover Ratio = `"Cost of Revenue from operations"/"Average Inventory"`
Average Inventory = `["Inventory in the beginning" + "Inventory at the end"]/2`
= `[58,000 + 62,000]/2`
= 60,000
Inventory Turnover Ratio = `[240,000]/[60,000]` = 4 times
Trade Receivables Turnover Ratio = `"Net Revenue from operations"/"Average Trade Receivables"`
= `[3,00,000]/[32,000] = 9.4 times
Note: In the solution, Trade Receivables are assumed as the Average Trade Receivables
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