Company A has Rs. 12 Lakhs of net sales over the past 12 months. The average working capital during that time was Rs. 2 Lakhs. Calculate Working capital Turnover ratio.

4 Times

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2 Times

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6 Times

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Solution

The correct option is C
6 Times

Working Capital Turnover Ratio = 12 lakhs / 2 lakhs = 6 Times

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Sakshi Ltd. is a company manufacturing electronic goods. It has a share capital of Rs. 120 lakhs. The earning per share in the previous years was Rs 0.5. For diversification, the company requires additional capital of Rs 80 lakhs. The company raised funds by issuing 10% debentures for the same. During the current year, the company earned a profit of Rs. 16 lakhs on capital employed. It paid a tax of 40 $%$ .

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The following Balance Sheet and other information, calculate following ratios:

(i) Debt-Equity Ratio (ii) Working Capital Turnover Ratio (iii) Trade Receivables Turnover Ratio

Balance Sheet as at March 31, 2017
Particulars	Note No.	Rs.
I. Equity and Liabilities:
1. Shareholders’ funds
a) Share capital		10,00,000
b) Reserves and surplus		9,00,000
2. Non-current Liabilities
a) Long-term borrowings		12,00,000
3. Current Liabilities
a) Trade payables		5,00,000
Total		36,00,000
II. Assets
1. Non-current Assets
a) Fixed assets
Tangible assets		18,00,000
2. Current Assets
a) Inventories		4,00,000
b) Trade Receivables		9,00,000
c) Cash and cash equivalents		5,00,000
Total		36,00,000

Additional Information: Revenue from Operations Rs. 18,00,000 Calculate:

i) Debt-Equity Ratio

ii) Working Capital Turnover Ratio

iii) Trade Receivables Turnover Ratio

(Debt-Equity Ratio 0.63:1; Working Capital Turnover Ratio 1.39 times; Trade Receivables Turnover Ratio 2 times)

There are two companies B and D. Total contribution of capital is Rs.40 lakhs each. The proportion of equity in the total capital of the company B is Rs. 10 lakhs and debt is Rs.30 lakhs. While in company D, the total equity capital is Rs.40 lakhs, sourced through equity. EBIT is Rs.8 lakhs, the interest rate on debt is @ 10% and the tax rate is 30%. Which company enjoys the favourbale financial leverage?

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Company A has Rs. 12 Lakhs of net sales over the past 12 months. The average working capital during that time was Rs. 2 Lakhs. Calculate Working capital Turnover ratio.

The correct option is C 6 Times Working Capital Turnover Ratio = 12 lakhs / 2 lakhs = 6 Times

The correct option is C
6 Times

Working Capital Turnover Ratio = 12 lakhs / 2 lakhs = 6 Times