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Question

From the following information, calculate Operating Ratio and Quick Ratio.

Revenue from operations Rs 3,00,000; Opening Inventory Rs 10,000; Purchases Rs 1,20,000; Wages Rs 30,000 ; Closing Inventory Rs 30,000; Selling and Distribution Expenses Rs 10,000; Currnet Assets Rs 2,00,000 and Current Liabilities Rs 1,20,000.

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Solution

Operating Ratio =(Cost of revenue from operations + Operating expenses)Revenue from operations×100

=(1,20,000+10,000+30,00030,000+10,000)3,00,000×100

=1,40,0003,00,000×100=46.67%

Quick ratio=Quick AssetsCurrent liabilities

Quick asset=Current Assets -Closing inventory

=2,00,00030,000

=Rs 1,70,000

Quick ratio = 1,70,0001,20,000=1.42:1


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