Calculate Current Assets when,
Inventory Turnover Ratio - 4 times
Closing inventory is ₹20,000 more than opening inventory
Revenue from operations is ₹3,00,000,
Gross Profit Ratio 20% of revenue from operations.
Current Liabilities ₹40,000
Quick Ratio 0.75 : 1
Answer & explanation
Correct answer: option 2
The correct answer is option 2- ₹1,00,000.
Gross profit ratio = Gross profit/Revenue from operations x 100
20 = Gross profit/3,00,000 x 100
Gross profit = 20 x 3,00,000/100
= 60,000
Cost of revenue from operations = Revenue from operations -Gross profit
= 3,00,000 - 60,000
= 2,40,000
Inventory turnover ratio = Cost of revenue from operations/ Average inventory
4 = 2,40,000 / Average inventory
Average inventory = 2,40,000/4
= 60,000
Closing inventory is ₹20,000 more than opening inventory
Let opening inventory = x
Closing inventory = x + 20,000
Average inventory = (Opening inventory + Closing inventory)/2
60,000 = (x + x +20,000)/2
60,000 = (2x + 20,000)/2
60,000 = x + 10,000
x = 50,000
Opening inventory = 50,000
Closing inventory = 50,000 + 20,000
= 70,000
Quick ratio = 0.75 :1
Quick ratio = Liquid assets/ Current liabilities
0.75/1 = Liquid assets/40,000
Liquid assets = 40,000 x 75/100
= 30,000
Currents assets = Liquid assets + Closing inventory
= 30,000 + 70,000
= 1,00,000