Question

Following information is given to you:

Trade Receivables on 1st April, 2022	₹ 6,80,000
Trade Receivables on 31st March, 2023	₹ 8,20,000
Trade Receivables Turnover Ratio	6 times
Credit Revenue from Operations	80% of Revenue from Operations
Working Capital Turnover Ratio	9 times
Current Ratio	2.25

Calculate:

1. Revenue from Operations
2. Working Capital
3. Current Assets

Answer 1

(i)

Average Trade Receivables = `("Opening Trade Receivables" + "Closing Trade Receivables")/2`

= `(₹ 6,80,000  + ₹ 8,20,000)/2`

= `(₹ 15,00,000)/2`

= ₹ 7,50,000

Trade Receivables Turnover Ratio = `"Credit Revenue from Operations"/"Average Trade Receivables"`

6 = `"Credit Revenue from Operations"/(₹ 7,50,000)`

Credit Revenue from Operations = ₹ 7,50,000 × 6

= ₹ 45,00,000

Let the Revenue from Operations be x.

Credit Revenue from Operations = 80% of Revenue from Operations

₹ 45,00,000 = `80/100 xx` x

`(₹ 45,00,000 xx 100)/80` = x

x (Revenue from Operations) = ₹ 56,25,000

(ii)

Working Capital Turnover Ratio = `"Revenue from Operations"/"Working Capital"`

9 = `(₹ 56,25,000)/"Working Capital"`

Working Capital = `(₹ 56,25,000)/9`

= ₹ 6,25,000

(iii)

Let the Current Liabilities be x.

Current Ratio = `"Current Assets"/"Current Liabilities"`

2.25 = `"Current Assets"/x`

Current Assets = 2.25x

Working Capital = Current Assets − Current Liabilities

₹ 6,25,000 = 2.25x − x

₹ 6,25,000 = 1.25x

x = `(₹ 6,25,000)/1.25`

x (Current Liabilities) = ₹ 5,00,000

Working Capital = Current Assets − Current Liabilities

₹ 6,25,000 = Current Assets − ₹ 5,00,000

₹ 6,25,000 + ₹ 5,00,000 = Current Assets

Current Assets = ₹ 11,25,000