Financial Statements

Ratios

Medium

A trader carries an average inventory of Rs. 40,000. His inventory turnover ratio is 8 times. If he sells goods at a profit of 20% on Revenue from operations, find out the gross profit.

Rs. 60,000

Rs. 70,000

Rs. 90,000

Rs. 80,000

✅ Correct Option: 4

Finding Cost of Revenue from Operations:

$\text{Inventory Turnover Ratio} = \frac{\text{Cost of Revenue from Operations}}{\text{Average Inventory}}$

$8 = \frac{\text{Cost of Revenue from Operations}}{40,000}$

Cost of Revenue from Operations = 8 × 40,000 = Rs. 3,20,000

Finding Revenue from Operations:

Given that profit is 20% on Revenue from Operations (Sales).

If Revenue from Operations = $S$ , then Gross Profit = 20% of $S$ = 0.20 $S$

Using the relationship:

Revenue from Operations = Cost of Revenue from Operations + Gross Profit

$S = 3,20,000 + 0.20S$

$S - 0.20S = 3,20,000$

$0.80S = 3,20,000$

$S = 4,00,000$

Calculating Gross Profit:

Gross Profit = 20% of Revenue from Operations

Gross Profit = 20% × 4,00,000 = Rs. 80,000

The answer is Option 4: Rs. 80,000

2023: 11 June Shift 3

Identify the other name by which Liquid ratio is known :

2025: 14 May Shift 2

P/E Ratio (Price Earning Ratio)

2022: 16 July Shift 2

Make the right combination of the ratios that enables to find the short term liquidity

A. Return on Equity

B. Acid Test Ratio

C. Sacrificing Ratio

D. Inventory Turnover Ratio

E. Current Ratio

Choose the correct answer from the options given below:

2024

Calculate Average Collection Period.

2025: 14 May Shift 1

Which of the following statements are True about ratio analysis-

(A) A ratio reflects quantitative and qualitative aspects of results.

(B) Long-term borrowings are concerned about the ability of a firm to discharge its obligations to pay interest and repay the principal amount

(D) Ratios help in comparisons of a firm's results over a number of accounting periods as well as with other business enterprises.

Choose the correct answer from the options given below:

2023: 20 June Shift 2

Match List I with List II

LIST I	LIST II
A. Operating Profit Ratio	I. Solvency Ratios
B. Working Capital Turnover Ratio	II. Liquidity Ratios
C. Debt-Equity Ratio	III. Activity Ratios
D. Quick Ratio	IV. Profitability Ratios

Choose the correct answer from the options given below:

A trader carries an average inventory of Rs. 40,000. His inventory turnover ratio is 8 times. If he sells goods at a profit of 20% on Revenue from operations, find out the gross profit.

Solution

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