Calculate: (a) Operating Ratio (b) Inventory Ratio (c) Proprietary Ratio from the following information : (4+2+2=8)

Information:
Cash Revenue from operation : Rs. 1,00,000
Credit Revenue from operation : 120% of Cash Revenue from operations
Operating Expenses : 10% of total Reve

Question

Calculate: (a) Operating Ratio (b) Inventory Ratio (c) Proprietary Ratio from the following information : (4+2+2=8)

Information:
Cash Revenue from operation : Rs. 1,00,000
Credit Revenue from operation : 120% of Cash Revenue from operations
Operating Expenses : 10% of total Revenue from operations
Rate of gross profit : 40%
Opening Inventory : Rs. 15,000
Closing Inventory : Rs. 2,000 more than Opening Inventory
Current Assets : Rs. 30,000
Current Liabilities : Rs. 20,000
Share Capital : Rs. 60,000
Fixed Assets : Rs. 50,000

OR

From the following information, find out the value of : (2+2+4=8)
(i) Cost of Revenue from operations
(ii) Revenue from operations and
(iii) Closing Inventory

Information :
(a) Average Inventory Holdings = 2 months
(b) Gross profit Ratio = 20%
(c) Gross Profit = Rs. 60,000
(d) Closing Inventory was Rs. 5,000 in excess of opening Inventory

Accepted Answer

>

> [!TLDR]
> Main part: Operating Ratio = 70%, Inventory Turnover Ratio = 8.25 times, Proprietary Ratio = 0.75 : 1. OR part: Cost of Revenue = Rs. 2,40,000; Revenue from Operations = Rs. 3,00,000; Closing Inventory = Rs. 42,500.
>
> ### Main part
>
> **Step 1 — Total Revenue from Operations:**
> Cash Revenue = Rs. 1,00,000
> Credit Revenue = 120% × 1,00,000 = Rs. 1,20,000
> Total Revenue from Operations = 1,00,000 + 1,20,000 = **Rs. 2,20,000**
>
> **Step 2 — Operating Expenses:**
> = 10% × 2,20,000 = **Rs. 22,000**
>
> **Step 3 — Gross Profit and Cost of Revenue from Operations:**
> Gross Profit = 40% × 2,20,000 = Rs. 88,000
> Cost of Revenue from Operations = Revenue − Gross Profit = 2,20,000 − 88,000 = **Rs. 1,32,000**
>
> **Step 4 — Inventory:**
> Opening Inventory = Rs. 15,000
> Closing Inventory = 15,000 + 2,000 = Rs. 17,000
> Average Inventory = (15,000 + 17,000) / 2 = **Rs. 16,000**
>
> **(a) Operating Ratio = (Cost of Revenue from Operations + Operating Expenses) / Revenue from Operations × 100**
> = (1,32,000 + 22,000) / 2,20,000 × 100
> = 1,54,000 / 2,20,000 × 100
> = **70%**
>
> **(b) Inventory (Stock) Turnover Ratio = Cost of Revenue from Operations / Average Inventory**
> = 1,32,000 / 16,000
> = **8.25 times**
>
> **(c) Proprietary Ratio = Shareholders' Funds / Total Assets**
> Shareholders' Funds = Share Capital = Rs. 60,000 (no reserves given)
> Total Assets = Current Assets + Fixed Assets = 30,000 + 50,000 = Rs. 80,000
> Proprietary Ratio = 60,000 / 80,000 = **0.75 : 1 (or 75%)**
>
> ### OR part
>
> **Step 1 — Revenue from Operations and Cost of Revenue from Operations:**
> Gross Profit Ratio = Gross Profit / Revenue from Operations = 20%
> Given Gross Profit = Rs. 60,000:
> **(ii) Revenue from Operations = 60,000 / 20% = Rs. 3,00,000**
> **(i) Cost of Revenue from Operations = Revenue − Gross Profit = 3,00,000 − 60,000 = Rs. 2,40,000**
> …

Component	Journal Entry (Debit/Credit)
Purchases	Debit Purchases A/c, Credit Cash/Supplier A/c
Salaries	Debit Salaries A/c, Credit Cash/Bank A/c
Depreciation	Debit Depreciation A/c, Credit Accumulated Depreciation A/c
Revenue from Operations	Debit Cash/Bank/Debtors A/c, Credit Revenue from Operations A/c

Q.Calculate:

Concept understanding — Operating Ratio Calculation

Operating Ratio — A First Look

Precise Meaning (NCERT Definition)

Why It Matters

Accounting Treatment — Which Account is Debited/Credited?

Proforma / Format (as per NCERT) …

Main part

OR part

Part (a) — Cost of Revenue from Operations

Q.Calculate:

Main part

OR part

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