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(a) From the following information calculate (up to two decimal places):

(i) Gross Profit Ratio 

(ii) Inventory Turnover Ratio 

(iii) Net Profit Ratio

Cash Revenue from Operations — Rs 70,000

Net Purchases — Rs 2,97,000

Credit Revenue from Operations — Rs 2,80,000

Closing Inventory — Rs 80,000

Opening Inventory — Rs 60,000

Carriage inward — Rs 3,000

Selling expenses — Rs 5,000

Administrative expenses — Rs 40,000

Loss on sale of fixed asset — Rs 10,000

Dividend received — Rs 7,000

(b) The Current Ratio of a company is 2 : 1. State whether the following will increase, reduce or not change the ratio .

(i) Bills Payable ? 5,000 discharged. 

(ii) Purchase of inventory Rs 20,000 on credit.

(c) Give the formulae for calculating :

(i) Earning per share 

(ii) Trade Payables Turnover Ratio

1 Answer

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Best answer

(b) Current Ratio = 2 : 1

(i) When Bills payable Rs 5000 discharged then current ratio will increase.

(ii) Purchase of inventory Rs 20,000 on Credit will not Change the current ratio.

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