Question

From the following, calculate the Gross Profit ratio and Working Capital Turnover Ratio.

Revenue from operations Rs 30,00,000

Cost of Revenue from operation Rs 20,00,000

Current Assets Rs 6,00,000

Current Liabilities Rs 2,00,000

Paid up share capital Rs 5,00,000

Answer 1

Gross Profit Ratio = $\frac{\text{Gross profit}}{\text{Revenue from operation}}$

= $\frac{10,00,000}{30,00,000}\times 100=33\frac{1}{3}\%$

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

= $\frac{30,00,000}{4,00,000}=7.5$ times.

Working Notes :

1. Gross Profit = Revenue from operation - Cost of revenue from operation

= Rs 10,00,000

2. Working Capital = Current Assets - Current Liabilities

= Rs 4,00,000.