Activity / Performance / Turnover ratio

• Evaluate how well a firm utilizes its assets to generate sales

• Inventory Turnover Ratio [ITR]
: To know the demand of our product
: Cost Rop / Ai
: Cost Rop
: Purchases + Oi + Direct exp – Ci
OR
: Rop – Gp
: Ai : [Oi + Ci] / 2
: in times
: high → more demand to product
: low → less demand to product
• Trade receivable [T/r] Turnover Ratio [TTr]
: To evaluate the speed in collecting money from our debtors
: Net Credit Rop ÷ Avg T/r
: Credit Rop = Rop – Cash Rop
: Avg T/r = [Open T/r + Closing T/r ] ÷ 2
: in times
: High → efficient in collecting money from debtors
: Low → not so efficient in collecting money from debtors
o Debt [Avg] collection period
: Time period between the collection periods
: In days = 365 / TTr
: In months = 12 / TTr
• Trade payable [T/p] Turnover Ratio [TPr]
: To evaluate the speed in giving back our debts to creditors
: Net Credit purchase ÷ Avg T/p
: Avg T/p = [Opening T/p + Closing T/p] ÷ 2
: In times
: High → we will pay back the amount to creditors effectively
: Low → we are not so effective in clearing our credits
o Avg payment period / Avg Age of payables
: Time period between the payments
: In days = 365 / TPr
: In months = 12 / TPr
• Working Capital turnover ratio
: Rop / Wc
: Wc = Ca – Cl
: in times
: High → properly utilizing Wc
: Low → not so effective in using Wc
MCQs
1) Oi = 15,000/-; Ci = 25,000/-; Purchases = 90,000/-; Wages = 10,000/-; Carriage O/w =
5,000/-; Return O/w [purchase return] = 2,000/-; Rop = 1,20,000/-; Carriage i/w = 4,000/-
; Rent = 5,000/- Calculate Cost Rop.
[a] 1,27,000/- [b] 1,22,000/- [c] 94,000/- [d] 92,000/-
Cost Rop : Purchases + Oi + Direct exp – Ci
Purchases : Purchases – return O/w = 90,000 – 2,000 = 88,000/-
Oi : 15,000/-
Ci : 25,000/-
Direct exp : Wages + Carriage i/w = 10,000 + 4,000 = 14,000/-
Then; Cost of ROP = ________________________
Direct exp include carriage i/w;
wages; factory lighting and all factory
expenses

2) Credit Rop = 1,00,000/-; Cash Rop = 80,000/-; Return I/w [sales return]= 30,000/-; Gp
ratio on cost = 25%; Cost Rop will be
[a] 1,50,000/- [b] 1,25,000/- [c] 1,20,000/- [d] 1,10,000/-
Cost Rop : Rop – Gp
Rop : Credit Rop + Cash Rop – Return i/w
: 1,00,000 + 80,000 – 30,000
: 1,50,000/-
Gp : Given that Gp ratio on cost = 25%
: Means; Gp = 25%; Cost = 100%; then Rop = 125%
: Given Rop [125%] = 1,50,000/-
: Then Gp [25%] = [1,50,000 / 125] x 25
: ___________________
Cost Rop : ___________________
3) Oi = 52,000/-; Ci = 50,400/-; Rop = 3,20,000/-; Gp ratio = 20%; ITR will be
ITR : Cost Rop / Ai
Cost Rop : Given that Gp ratio is 20%
: Means Gp = 20%; Rop = 100% and Cost Rop [100 – 20 = 80%]
: Given that Rop [100%] = 3,20,000/-
: Then Cost Rop [80%] = [3,20,000 / 100] x 80 =______________
Ai : [Oi + Ci] / 2 = ___________________
ITR :
4) OI = 28,000/-; Ci = 52,000/-; Cost Rop = 6,00,000/-; Gp ratio is 25% on cost Rop; ITR will
be
[a] 17.75 times [b] 18.75 times [c] 15 times [d] 16 times
5) Cost Rop = 6,00,00/-; Purchases = 5,80,000/-; Direct expenses = 40,000/-; Oi = 70,000/-;
Ci will be
[a] 90,000/- [b] 50,000/- [c] 20,000/- [d] 70,000/-
6) Rop = 16,00,000/-; Ai = 1,76,000/-; Gross loss ratio = 10%; ITR = ?
 ITR = Cost Rop / Ai
Cost Rop = Given that Gross loss ratio is 10%
= Then Gross loss is 10%; Rop = 100% and Cost Rop = 100 + 10 = 110%
= Given Rop [100%] = 16,00,000/-
= Then; Cost Rop [110%] = [16,00,000 / 100] x 110 = ___________
Ai = 1,76,000/-
ITR = _______________________
7) Rop 2,00,000/-; Gp 25% on cost; Oi was half of the value of Ci; Ci was 20% of Rop; ITR = ?
[a] 4 times [b] 8 times [c] 5.33 times [d] 4.33 times
8) Cost Rop = 6,40,000/-; Gp 25% on cost; Ci is 4 times of Oi; Oi is 10% of Rop; ITR = ?
[a] 3.2 times [b] 8 times [c] 2 times [d] 4 times
9) ITR is 7 times; Cost Rop 3,50,000/-; Oi is 10,000/- less than Ci; Oi will be
[a] 55,000/- [b] 45,000/- [c] 50,000/- [d] 60,000/-
10) ITR is 5 times; Cost of Rop = 1,50,000/-; Ci is 5,000/- less than Oi; Oi will be
[a] 25,000/- [b] 27,500/- [c] 30,000/- [d] 32,500/-
11) ITR = 10 times; Cost Rop = 2,20,000/-; Ci was 3 times than Oi; Oi will be
[a] 11,000/- [b] 22,000/- [c] 33,000/- [d] 44,000/-
12) ITR = 4 times; Cost Rop = 2,00,000/-; Ci was 3 times more than in the beginning; Oi will
be
[a] 50,000/- [b] 1,00,000/- [c] 20,000/- [d] 80,000/-
13) Ai = 60,000/-; ITR = 8 times; Rop is 25% above cost; Rop will be __________
[a] 4,80,000/- [b] 6,00,000/- [c] 3,60,000/- [d] 5,00,000/-
14) Ai = 1,25,000/-; ITR = 4 times; Gp 10% of cost Rop; Gp will be
[a] 50,000/- [b] 80,000/- [c] 12,500/- [d] 40,000/-
15) Rop is 2,00,000/-; Cash Rop = 70,000/-; Avg T/r = 10,000/-; TTr will be
16) Rop 4,00,000/-; Cash Rop is 20% of Rop; Avg T/r = 25,000/-; TTr will be
17) Credit Rop = 24,00,000/-; TTr = 6 times; Opening T/r = 3,00,000/-; Closing T/r will be
18) Credit Rop = 8,20,000/-; TTr = 10 times; Closing Tr is 8,000/- more than the opening Tr.
Closing Tr will be
19) Credit Rop = 10,00,000/-; TTr = 10 times; Closing Tr are three times in comparison to
opening Tr; Closing Tr will be
20) Credit Rop = 10,00,000/-; TTr = 10 times; Closing Tr are two times more than Opening
Tr. Closing Tr will be
21) Credit Rop = 10,00,000/-; TTr is 10 times; Closing Tr are 1/3 rd of opening Tr. Closing Tr
will be
22) Rop = 10,00,000/-; Cash Rop is 25% of Credit Rop;TTr is 5 times; Closing Tr is 1/4 th of
opening Tr. Closing Tr will be
23) TTr = 6 times; Avg Tr = 80,000/-; Cash Rop is 25% of Rop; Cash Rop will be
24) Cost Rop = 10,00,000/-; Gp is 20%; Cash Rop is 20% Rop; TTr is 10 times; Closing Tr are
1/4th of opening Tr. Closing Tr will be
25) Credit purchase = 10,00,000/-; Opening creditors 80,000/-; Closing creditors 1,20,000/-;
Tp turnover ratio will be
26) Total purchase = 10,00,000/-; Cash purchase is 25% of toal purchase; opening creditors
is 1,30,000/-; closing creditors = 1,70,000/-; TP turnover ratiowill be
27) Total purchase = 12,00,000/-; cash purchase is 25% of credit purchase; opening creditors
1,00,000/-; closing creditors 1,40,000/-; TP turnover ratio will be
28) Purchase 2,00,000/-; Cash purchase is 25% of credit purchase; Opening creditors was 2
times of closing creditor; opening creditor 50,000/-. TP turnover ratio will be
29) Credit Rop = 15,00,000/-; Cash Rop is 25% of Rop; liquid asset 2,00,000/-; Inventory
1,00,000/-; Current liability 1,20,000/-; Working capital turnover ratio will be