Question

From the following calculate:

(a) Current Ratio; and
(b) Working Capital Turnover Ratio.

		₹
(i)	Revenue from Operations	1,50,000
(ii)	Total Assets	1,00,000
(iii)	Shareholders' Funds	60,000
(iv)	Non-current Liabilities	20,000
(v)	Non-current Assets	50,000

Answer 1

$\begin{array}{l}\text{A) Current Ratio =}\frac{\text{Current Assets}}{\text{Current Liabilities}}\\ \end{array}$
Current Assets = Total Assets – Non Current Assets
= 1,00,000 – 50,000
= Rs 50,000
Total Assets = Total Liabilities = Shareholders’ Funds + Non Current Liabilities + Current Liabilities
1,00,000 = 60,000 + 20,000 + Current Liabilities
Current Liabilities = Rs 20,000
$\begin{array}{l}\text{Current Ratio =}\frac{\text{50,000}}{\text{20,000}}\text{= 2}\text{.5}:\text{1}\\ \end{array}$

$\begin{array}{l}\text{B) Working Capital Turnover Ratio =}\frac{\text{Revenue from Operations}}{\text{Working Capital}}\\ \end{array}$
Working Capital = Current Assets – Current Liabilities
= 50,000 – 20,000
= Rs 30,000
$\begin{array}{l}\text{Working Capital Turnover Ratio =}\frac{\text{1},\text{50,000}}{\text{30,000}}\text{= 5 times}\\ \end{array}$