Question

Calculate Working Capital Turnover Ratio from the following information :

$\begin{array}{cc}& \text{Rs.}\\ \text{Current Assets}& 1,80,000\\ \text{Current Liabilities}& 30,000\\ \text{Cost of Revenue from Operations}& 10,00,000\\ \text{Gross Profit}& \text{20\% of Cost}\end{array}$

Answer 1

Working Capital Turnover Ratio $=\frac{\text{Revenue from Operations}}{\text{Working Capital}}$

Revenue from Operations = Cost of Revenue from Operations + Gross Profit

= Rs. 10,00,000 + 20% of 10,00,000

= Rs. 10,00,000 + 2,00,000 = Rs. 12,00,000

Working Capital = Current Assets - Current Liabilities

= Rs. 1,80,000 - Rs. 30,000 = Rs. 1,50,000.

Working Capital Turnover Ratio = $\frac{Rs.12,00,000}{Rs.1,50,000}=8$ times.