Determine the value of Revenue from Sales Operations with the following financial data: Acid Test Ratio…
Revenue from sales operations is ₹ 6,00,000 using the sales-based inventory turnover ratio. Current assets are 1.5 × ₹ 4,00,000 = ₹ 6,00,000 and quick assets are 1.2 × ₹…
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Determine the value of Revenue from Sales Operations with the following financial data:
Acid Test Ratio = 1·2
Current Ratio = 1·5
Current Liabilities = ₹ 4,00,000
Inventory Turnover Ratio (Revenue from Sales Operations to Inventory) = 5 times
Answer and explanation
Correct answer C
Revenue from sales operations is ₹ 6,00,000 using the sales-based inventory turnover ratio. Current assets are 1.5 × ₹ 4,00,000 = ₹ 6,00,000 and quick assets are 1.2 × ₹ 4,00,000 = ₹ 4,80,000, giving inventory of ₹ 1,20,000. Applying inventory turnover as sales divided by closing inventory gives sales = 5 × ₹ 1,20,000 = ₹ 6,00,000.
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West Bengal SET (WB SET)