Question

Calculate Working Capital Turnover Ratio from the following information:
Revenue from Operations ₹ 30,00,000; Current Assets ₹ 12,50,000; Total Assets ₹ 20,00,000; Non-current Liabilities ₹ 10,00,000, Shareholders' Funds ₹ 5,00,000.

Answer 1

$$\begin{gathered} \mathrm{Working}\mathrm{Capital}\mathrm{Turnover}\mathrm{Ratio}=\frac{\mathrm{Net}\mathrm{Sales}}{\mathrm{Working}\mathrm{Capital}} \\ \mathrm{Revenue}\mathrm{from}\mathrm{Operations}(\mathrm{Net}\mathrm{Sales})=\mathrm{Rs}30,00,000\left(\mathrm{Given}\right) \\ \mathrm{Working}\mathrm{Capital}=\mathrm{Current}\mathrm{Assets}-\mathrm{Current}\mathrm{Liabilities} \\ \mathrm{Current}\mathrm{Assets}=12,50,000\left(\mathrm{Given}\right) \\ \mathrm{Current}\mathrm{Liabilities}=? \\ \mathrm{Total}\mathrm{Assets}=\mathrm{Total}\mathrm{Liabilities}=\mathrm{Rs}20,00,000\left(\mathrm{Given}\right) \\ \mathrm{Total}\mathrm{Liabilities}=\mathrm{Shareholders}\text{'}\mathrm{Funds}+\mathrm{Non}-\mathrm{Current}\mathrm{Liabilities}+\mathrm{Current}\mathrm{Liabilities} \\ 20,00,000=5,00,000+10,00,000+\mathrm{Current}\mathrm{Liabilities} \\ \mathrm{Current}\mathrm{Liabilities}=\mathrm{Rs}5,00,000 \\ \mathrm{Working}\mathrm{Capital}=12,50,000-5,00,000=\mathrm{Rs}7,50,000 \\ \mathrm{Working}\mathrm{Capital}\mathrm{Turnover}\mathrm{Ratio}=\frac{30,00,000}{7,50,000}=4\mathrm{times} \end{gathered}$$