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12th Class Accountancy Accounting Ratios Question Bank Case Based - Accounting Ratios

  • question_answer
    Read the following hypothetical extract of Aggarwal Limited and answer the given questions on the basis of the same:
    Year 2020 2019 2018
    Amount (In Rs.) (In Rs.) (In Rs.)
    Outstanding Expenses 25,000 20,000 12,500
    Prepaid Expenses 1,50,000 1,25,000 1,75,000
    Trade Pavables 9,00,000 8,00,000 7,00,000
    Inventory 6,00,000 5,00,000 5,50,000
    Trade Receivables 5,50,000 4,00,000 5,00,000
    Cash in Hand 8,50,000 6,00,000 7,50,000
    Revenue from Operations 12,00,000 9,00,000 10,00,000
    Gross Profit Ratio 12% 15% 18%
    Based on the above information you are required to answer the Following questions:
    Inventory turnover ratio for the year 2020 will be:

    A) 1.62 times         

    B) 1.82 times

    C) 1.55 times         

    D) 1.92 times

    Correct Answer: D

    Solution :

    [d] 1.92 times
    Hint: Inventory Turnover Ratio
    \[=\frac{Cost of Revenue from Operations}{~Average Inventory}\]
    \[ =\frac{Revenue from Operations - Gross Profit}{~Average Inventory}\]
    \[=\frac{12,00,000-\left( 12,00,000\times 12% \right)}{~5,00,000+6,00,000/2}\]
    \[=\frac{12,00,000-1,44,000}{~5,50,000}\]
    \[=\frac{10,56,000}{~5,50,000}\]=1.92 times


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