question_answer

Calculate current ratio of a company from the following information: Stock turnover ratio = 4 times Stock at the end = Rs. 20,000 more than stock in the beginning Revenue from operations = Rs. 5,00,000 Gross profit ratio = 20% Current liabilities = Rs. 50,000 Quick ratio = 0.8:1

Answer:

Gross Profit\[~=\text{ }5,00,000\times \frac{20}{100}=Rs.\,1,00,000;\]Cost of Revenue from Operations = 5,00,000 ? 1,00,000 = Rs. 4,00,000 Stock turnover Ratio \[=\frac{\text{Cost}\,\text{of}\,\text{Revenue}\,\text{form}\,\text{Operation}}{\text{Average}\,\text{Stock}}\Rightarrow 4=\frac{4,00,000}{Average\,\,Stock}\] \[\Rightarrow \text{Average}\,\text{Stock}=\frac{4,00,000}{4}=Rs.\,1,00,000\] Now, \[\frac{\text{Opening}\,\text{Sotck}+\text{Closing}\,\text{Stock}}{2}=1,00,000\] Let opening stock be x, \[\therefore \frac{x+x+20,000}{2}=1,00,000\Rightarrow 2x=2,00,000-20,000\Rightarrow x=\frac{1,80,000}{2}\Rightarrow x=Rs.\,90,000\] \[\therefore \]Opening Stock = Rs. 90,000 and Closing Stock = x + 20,000 = 90,000 + 20,000 = Rs. 1,10,000 Quick Ratio \[=\frac{Quick\,Assets}{Current\,Liabilities}\Rightarrow 0.8=\frac{Quick\,Assets}{50,000}\therefore Quick\,Assets=50,000\times 0.8=Rs.\,40,000\] Current Assets = Quick Assets + Stock at the End = 40,000 + 1,10,000 =Rs. 1,50,000 Current Ratio \[=\frac{\text{Current}\,\text{Assets}}{\text{Current}\,\text{Liabilities}}=\frac{1,50,000}{50,000}\Rightarrow 3:1\]