Working Capital Turnover Ratio

Q. Distinguish between Vertical and Horizontal Analysis of financial data.

Q.

How do you calculate The fixed asset turnover ratio?

Q. Calculate Gross Profit Ratio from the following data:
Average Inventory ₹3, 20, 000; Inventory Turnover Ratio 8 Times; Average Trade Receivables ₹4, 00, 000; Trade Receivables Turnover Ratio 6 Times; Cash Sales 25% of Net Sales.

Q.

Determine working capital turnover ratio if, current assets is Rs 1, 50, 000, current liabilities is Rs 1, 00, 000 and revenue from operations is Rs 3, 00, 000.

1. 2 times

2. 4 Times

3. None of these

4. 6 times

Q. (i) Revenue from Operations: Cash Sales ₹4, 20, 000; Credit Sales ₹6, 00, 000; Return ₹20, 000. Cost of Revenue from Operations or Cost of Goods Sold ₹8, 00, 000. Calculate Gross Profit Ratio.
(ii) Average Inventory ₹1, 60, 000; Inventory Turnover Ratio is 6 Times; Selling Price 25% above cost. Calculate Gross Profit Ratio.
(iii) Opening Inventory ₹1, 00, 000; Closing Inventory ₹60, 000; Inventory Turnover Ratio 8 Times; Selling Price 25% above cost. Calculate Gross Profit Ratio.

Q. Working capital turnover ratio shows the relationship between and revenue from operations

1. working capital
2. fixed capital
3. turnover
4. credit sales

Q. From current assets which of the following items is/are excluded while calculating working capital turnover ratio?

1. Inventories & Prepaid Expenses
2. Stores & Spares
3. Loose Tools
4. Both B and C

Q.

Q.

The following is the balance sheet of Tanu and Manu, who shares profit and losses in the ratio of 5:3. On December 31, 2012
$$\begin{array}{cccccccc}& & & & \text{Balance Sheet of Tanu and Manu}& & & \\ & & & & \text{as on December 31, 2012}& & & \end{array}$$

$$\begin{array}{ccccc}\text{Capital and Liabilities}& & \text{Amt. (Rs.)}& \text{Assets}& \text{Amt. (Rs.)}\\ \text{Sundry Creditors}& & 62,000& \text{Cash at Bank}& 16,000\\ \text{Bills Payable}& & 32,000& \text{Sundry Debtors}& 55,000\\ \text{Bank Loan}& & 50,000& \text{Stock}& 75,000\\ \text{Reserve Fund}& & 16,000& \text{Motor Car}& 90,000\\ \text{Capitals:}& & & \text{Machinery}& 45,000\\ \text{Tanu}& 1,10,000& & \text{Investment}& 70,000\\ \text{Manu}& \underset{–}{90,000}& \underset{–}{2,00,000}& \text{Fixtures}& \underset{–}{9,000}\\ & & 3,60,000& & 3,60,000\end{array}$$
On the above date, the firm is dissolved and the following agreement was made, Tanu agree to pay the bank loan and took away the sundry debtors. Sundry creditors accepts stock and paid Rs. 10, 000 to the firm. machinery is taken over by Manu for Rs. 40, 000 and agreed to pay of bills payable at a discount of 5%. Motor Car was taken over by Tanu for Rs. 60, 000, Investment realised Rs. 76, 000 and fixtures Rs. 4, 000.
The expenses of dissolution amounted to Rs. 2, 200.
Prepare realisation account, bank account and partners' capital account.

Q. From the following particulars, determine Trade Receivables Turnover Ratio:

	₹
Revenue from Operations (Net Sales)	10, 00, 000
Credit Revenue from Operations (Credit Sales)	8, 00, 000
Trade Receivables	1, 00, 000

Q.

Rose and Lily shared profits in the ratio of 2 : 3. Their Balance sheet on March 31, 2006 was as follows
Balance Sheet of Rose and Lily
As on March 31, 2006
$$\begin{array}{ccccc}\text{Capital and Liabilities}& \text{Amt.}& \text{Assets}& & \text{Amt.}\\ \text{Creditors}& 40,000& \text{Cash}& & 16,000\\ \text{Lily's Loan}& 32,000& \text{Debtors}& 80,000& \\ \text{Profit and Loss}& 50,000& (-)\text{Provision for Doubtful Debts}& \underset{–}{(3,600)}& 76,400\\ \text{Capital:}& & \text{Inventory}& & 1,09,600\\ \text{Lily}& 1,60,000& \text{Bill Receivable}& & 40,000\\ \text{Rose}& 2,40,000& \text{Buildings}& & 2,80,000\\ & \underset{–}{}& & & \underset{–}{}\\ & 5,22,000& & & 5,22,000\\ & \underset{–}{}& & & \underset{–}{}\end{array}$$
Rose and Lily decided to dissolve the firm on the above date. Assets (except bills receivables) realised 4, 84, 000. Creditors agreed to take Rs. 38, 000.
Cost of realisation was Rs. 2400. There was a Motor Cycle in the firm which was brought out of the firm's Money, was not shown in the Books of the firm. It was not sold for Rs. 10, 000 There was a continigent liability in respect of outstanding electric bill of Rs. 5, 000. Bill receivable taken over by Rose at Rs. 33, 000.
Show realisation account, partners' capital account, loan account and cash account.

Q.

Q.

Q. The following is the summarised transactions and profit and loss account for the year ending March 31, 2007 and the Balance Sheet as on that date.

$$\begin{array}{cccc}\text{Particulars}& \text{Amt.}& \text{Particulars}& \text{Amt}\\ \text{Opening Stock}& 5,000& \text{Sales}& 50,000\\ \text{Purchases}& 25,000& \text{Closing Stock}& 7,500\\ \text{Direct Expenses}& 2,500& & \\ \text{Gross Profit}& \underset{–}{25,000}& & \underset{–}{}\\ & \underset{–}{57,500}& & \underset{–}{57,500}\\ \text{Administrative Expenses}& 7,500& \text{Gross Profit}& 25,000\\ \text{Interest}& 1,500& & \\ \text{Selling Expensses}& 6,000& & \\ \text{Net Profit}& \underset{–}{10,000}& & \underset{–}{}\\ & \underset{–}{25,000}& & \underset{–}{25,000}\end{array}$$

Balance Sheet

$$\begin{array}{cccc}\text{Capital and Liabilities}& \text{Amt.}& \text{Assets}& \text{Amt}\\ \text{Share Capital}& 50,000& \text{Land and Building}& 25,000\\ \text{Current Liabilities}& 20,000& \text{Plant and Machinery}& 15,000\\ \text{Profit and Loss}& 10,000& \text{Stock}& 7,500\\ & & \text{Sundry Debtors}& 7,500\\ & & \text{Bills Receivables}& 6,250\\ & & \text{Cash in hand and at bank}& 8,750\\ & & \text{Furniture}& 10,000\\ & \underset{–}{}& & \underset{–}{}\\ & \underset{–}{80,000}& & \underset{–}{80,000}\end{array}$$

Calculate:
(i) Gross Profit Ratio
(ii) Current Ratio
(iii) Acid Test Ratio
(iv) Stock Turnover Ratio
(v) Fixed Assets Turnover Ratio

Q.

Capital employed in a business is Rs. 2, 00, 000. The normal rate of return on capital employed is 15%. During the year 2015 the firm earned a profit of Rs. 48, 000. Calculate goodwill on the basis of 3 years purchase of super profit?

Q.

What journal entries will be recorded for the following transactions on the dissolution of a firm:

[a] Payment of unrecorded liabilities of Rs 3, 200.

[b] Stock worth Rs 7, 500 is taken by a partner Rohit.

[c] Profit on Realisation amounting to Rs 18, 000 is to be distributed between the partners Ashish and Tarun in the ratio of 5:7.

[d] An unrecorded asset realised Rs 5, 500.

Q.

Working capital turnover ratio can be determined by:

1. $\left(\frac{\text{Gross Profit}}{\text{Working Capital}}\right)$

2. $\left(\frac{\text{Cost of goods sold}}{\text{Net Sales}}\right)$

3. None of these

4. $\left(\frac{\text{Revenue from Operations}}{\text{Working Capital}}\right)$

Q.

Q. The following is the summarised Profit and Loss Account and the Balance sheet of Nigam Limited for the year ended March 31, 2007

Profit and Loss Account
for the year ended March 31, 2007
$$\begin{array}{cccc}\text{Particulars}& \text{Amt. (Rs.)}& \text{Particular}& \text{Amt (Rs.)}\\ \text{Opening Stock}& 50,000& \text{Sales}& 4,00,000\\ \text{Purchases}& 2,00,000& \text{Closing Stock}& 60,000\\ \text{Direct Expenses}& 16,000& & \\ \text{Gross Profit}& \underset{–}{1,94,000}& & \underset{–}{}\\ & \underset{–}{4,60,000}& & \underset{–}{4,60,000}\\ \text{Salary}& 48,000& \text{Gross Profit}& 1,94,000\\ \text{Loss on Sale of Furniture}& 6,000& & \\ \text{Net profit}& \underset{–}{1,40,000}& & \underset{–}{}\\ & \underset{–}{6,00,000}& & \underset{–}{6,00,000}\end{array}$$

Balance Sheet of Nigam Limited
as on March 31, 2007

$$\begin{array}{cccc}\text{Capital and Liabilities}& \text{Amt. (Rs.)}& \text{Assets}& \text{Amt. (Rs.)}\\ \text{Profit and Loss}& 1,40,000& \text{Stock}& 60,000\\ \text{Creditors}& 1,90,000& \text{Land}& 4,00,000\\ \text{Equity Share Capital}& 2,00,000& \text{Cash}& 40,000\\ \text{Outstanding Expenses}& 70,000& \text{Debtors}& 1,00,000\\ & \underset{–}{}& & \underset{–}{}\\ & \underset{–}{6,00,000}& & \underset{–}{6,00,000}\end{array}$$

Calculate:
(i) Quick Ratio
(ii) Stock Turnover Ratio
(iii) Return on Investment

Q.

The following is the summerised transactions and Statement of Profit and Loss Account for the year ending March 31, 2007 and the Balance Sheet as on the basis of following information, calculate:

(i) Gross Profit Ratio (ii) Current Ratio (iii) Acid Test Ratio (iv) Inventory Turnover Ratio (v) Fixed Assets Turnover Ratio

	Rs.
Gross Profit	50, 000
Revenue from Operations	1, 00, 000
Inventory	15, 000
Trade Receivables	27, 500
Cash and Cash Equivalents	17, 500
Current Liabilities	40, 000
Land & Building	50, 000
Plant & Machinery	30, 000
Furniture	20, 000

Q. Working capital turnover ratio is expressed in .

1. pure ratio
2. times
3. percentage
4. days

Q.

What journal entries would be recorded for the following transactions on the dissolution of a firm after various assets (other than cash) on the third party liabilities have been transferred to Reliasation Account.

1. Arti took over the Stock worth Rs 80, 000 at Rs 68, 000.

2. There was unrecorded Bike of Rs 40, 000 which was taken over By Mr. Karim.

3. The firm paid Rs 40, 000 as compensation to employees.

4. Sundry creditors amounting to Rs 36, 000 were settled at a discount of 15%.

5. Loss on Realisation Rs 42, 000 was to be distributed between Arti and Karim in the ratio of 3:4.

Q.

Q. Working capital turnover ratio is a/an ratio.

1. profitability
2. activity
3. solvency
4. liquidity

Q. Working Capital Turnover Ratio
= Revenue from Operations / __________.

1. Trade Payable
2. Bills payable
3. Working Capital
4. Cost of Revenue from operations

Q.

Record necessary journal entries to record the following unrecorded assets and liabilities in the books of Paras and Priya:

1. There was an old furniture in the firm which had been written-off completely in the books. This was sold for Rs 3, 000,

2. Ashish, an old customer whose Account for Rs 1, 000 was written-off as bad in the previous year, paid 60%, of the amount,

3. Paras agreed to take over the firm’s goodwill (not recorded in the books of the firm), at a valuation of Rs 30, 000,

4. There was an old typewriter which had been written-off completely from the books. It was estimated to realize Rs 400. It was taken away by Priya at an estimated price less 25%,

5. There were 100 shares of Rs 10 each in Star Limited acquired at a cost of Rs 2, 000 which had been written-off completely from the books. These shares are valued @ Rs 6 each and divided among the partners in their profit sharing ratio.

Q.

Q. The proprietary ratio of M. Ltd. is $0.80:1$.
State with reasons whether the following transactions will increase, decrease or not change the proprietary ratio:
(i) Obtained a loan from bank Rs 2, 00, 000 payable after five years.
(ii) Purchased machinery for cash Rs 75, 000.
(iii) Redeemed 5% redeemable preference shares Rs 1, 00, 000.
(iv) Issued equity shares to the vendors of machinery purchased for Rs 4, 00, 000.

Q.

M.Ltd. took over assets of Rs 9, 00, 00, 000 and liabilities of Rs 70, 00, 000 of S.Ltd. and issued 8%Debenture of Rs 100 each. Record necessary entries in the books of M. Ltd.

Q.