Join Sarthaks eConnect Today - Largest Online Education Community!
0 votes
6 views
asked in Accounts by (43.9k points)

Piper pipes Ltd. ahs provided the following information:

Stock Turnover Ratio6 times
Gross Profit Ratio20% on sales
Sales 3,00,000
Closing stock is Rs. 10,000 more than the opening stock
Opening CreditorsRs. 20,000
Closing CreditorsRs. 30,000
Trade Debtors At The EndRs. 60,000
Net Working CapitalRs. 50,000

Calculate: 

(a) Average stock 

(b) Purchases 

(c) Creditors turnover ratio 

(d) Average payment period 

(e) Average collection period 

(f) Working capital turnover ratio

1 Answer

+1 vote
answered by (46.8k points)
selected by
 
Best answer

Cost Of Goods Sold = Sales – Gross Profit 

= 3,00,000 – 20% of profit 

= Rs. 2,40,000

Stock Turnover Ratio = Cost Of Goods Sold / Avaerage Stock

6 = 2,40,000 / Average Stock

Average Stock = 2,40,000 / 6 = Rs. 40,000 …. (a)

Average Stock = (Opening Stock + Closing Stock) / 2

40,000 = {Opening Stock + (10,000 + Opening Stock)} / 2

Opening stock = Rs. 35,000

Closing stock = Rs. 45,000

Cost Of Goods Sold = Opening Stock + Purchases – Closing Stock

Purchases = Cost Of Goods Sold + Closing Stock – Opening Stock

= 2,40,000 + 45,000 – 35,000

Purchases = Rs. 2,50,000.........(b)

Creditors Turnover Ratio = Credit Purchases / Average Trade Creditors 

Average Trade Creditors = (Opening Creditors + Closing Creditors) / 2

= (20,000 + 30,000) / 2

= Rs. 25,000

Assuming all purchases to be credit purchases

Creditors Turnover Ratio = 2,50,000 / 25,000

Creditors Turnover Ratio = 10 Times……(c)

Average Payment Period = 365 / Creditors Turnover Ratio

= 365 / 10 

Average Payment Period = 36.5 days or 37 days (approx.)…....(d)

Debtors Turnover Ratio = Credit Sales / Average Trade Debtors

= 3,00,000 / 60,000 = 5 times

Average Collection Period = 365 / Debtors Turnover Ratio

= 365 / 5

Average Collection Period = 73 days……..(e)

Working Capital Turnover Ratio = Cost Of Goods Sold / Net Working Capital

= 2,40,000 / 50,000

Working Capital Turnover Ratio = 4.8 Times…….(f)

Related questions

Welcome to Sarthaks eConnect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries. Students (upto class 10+2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains+Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.

One Thought Forever

“There is a close connection between getting up in the world and getting up in the morning.“
– Anon
~~~*****~~~

Categories

...