Question 186:

From the given information, calculate the following ratios:

(i) Operating Ratio, and (ii) Inventory Turnover Ratio.

Information:

 

Answer:

 

(i) Operating Ratio

 

Cost of goods Sold = 8,80,000 + 2,20,000 = 11,00,000

 

Operating Ratio =  = 70%

 

Operating Ratio =  = 70%

 

Working Notes:

 

Operating Cost = Cost of goods Sold + Operating Expenses

Operating Cost = 13,20,000 + 2,20,000 = 15,40,000

 

(ii) Inventory Turnover Ratio

Inventory Turnover Ratio = 

Inventory Turnover Ratio =   = 8.25 Times

Working Notes:

Cost of goods Sold = Revenue – Gross Profit

Cost of goods Sold = 22,00,000 – 8,80,000

Cost of goods Sold = 13,20,000

 

Question 187:

Calculate current assets and quick assets of a company from the following information

Quick Ratio = 0.70:1

Inventory at the end was ₹ 20,000 more than inventory in the beginning

gross Profit = ₹ 75,000

current Liabilities = ₹ 80,000

Revenue from Operation = ₹ 4,00,000

 

(CBSE 2025 C)

Answer:

 

Calculation of quick assets

1. Quick Ratio = Quick asset ÷ Current Liabilities

0.70 = Quick Assets ÷₹80,000

Quick Assets = 0.70 ÷ ₹80,000 = ₹56,000

2. Calculation of Current Assets

Calculate Cost of Goods Sold

Cost of Goods Sold = Revenue from Operations - Gross Profit

Cost of Goods Sold = ₹4,00,000 ÷ ₹75,000 = ₹3,25,000

Calculate Ending Inventory

Using the standard Inventory Turnover Ratio of 5 times:

Average Inventory = Cost of Goods Sold ÷ Inventory Turnover Ratio

Average Inventory = ₹3,25,000 ÷ 5 = ₹65,000

 

Let the Opening Inventory be x. The Closing Inventory is x + ₹20,000:

Average Inventory = Opening Inventory + Closing Inventory ÷ 2

₹65,000 = x + (x + ₹20,000) ÷ 2

₹1,30,000 = 2x + ₹20,000

2x = (₹1,30,000 - ₹20,000)

2x = ₹1,10,000

x = ₹55,000 (Opening Inventory)

Closing Inventory = ₹55,000 + ₹20,000 = ₹75,000

Calculate Current Assets:

Current Assets = Quick Assets + Closing Inventory

Current Assets = ₹56,000 + ₹75,000 = ₹1,31,000