Calculate current ratio of a company from the following information I

1.	Calculate current ratio of a company from the following information Inventory turnover ratio = 4 times Inventory in the end was Rs. 20,000 more than inventory in the beginning. Revenue from operations Rs. 3,00,000 Gross profit ratio = 25% Current liabilities Rs. 40,000; Quick ratio 0.75:1 Cost of revenue from operations.
Answer» Inventory turnover ratio = (Cost of revenue from operations)/(Average inventory) 4(Given) = (Revenue from operations - Gross profit)/(Average Inventory) Average Inventory = (3,00,000 - 25% of 3,00,000)/(Average Inventroy) Average inventory = 2,25,000/4 = Rs. 56,250 Rs. 56,250 + 10,000 = Rs. 66,250 Current assets = Liquid assets + Closing inventory with the help of quick ratio. We can find out liquid assets. Quick ratio = (Liquid assets)/(Current liabilities) 0.75(given) = (Liqued assets)/40,000 Liquid assets = Rs. 40,000 x 0.75 = Rs. 30,000 Current assets = Liquid assets + Inventory = Rs. 30,000 + Rs. 66,250 = Rs. 96,250 Current ratio = (Curret assets)/(Current liabilities) = 96,250/40,000 = 2.41:1

Calculate current ratio of a company from the following information Inventory turnover ratio = 4 times Inventory in the end was Rs. 20,000 more than inventory in the beginning. Revenue from operations Rs. 3,00,000 Gross profit ratio = 25% Current liabilities Rs. 40,000; Quick ratio 0.75:1 Cost of revenue from operations.

Answer»

Inventory turnover ratio = (Cost of revenue from operations)/(Average inventory)

4(Given) = (Revenue from operations - Gross profit)/(Average Inventory)

Average Inventory = (3,00,000 - 25% of 3,00,000)/(Average Inventroy)

Average inventory = 2,25,000/4

= Rs. 56,250

Rs. 56,250 + 10,000

= Rs. 66,250

Current assets = Liquid assets + Closing inventory with the help of quick ratio.

We can find out liquid assets.

Quick ratio = (Liquid assets)/(Current liabilities)

0.75(given) = (Liqued assets)/40,000

Liquid assets = Rs. 40,000 x 0.75

= Rs. 30,000

Current assets = Liquid assets + Inventory

= Rs. 30,000 + Rs. 66,250

= Rs. 96,250

Current ratio = (Curret assets)/(Current liabilities)

= 96,250/40,000

= 2.41:1