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Question
Calculate Working Capital Turnover Ratio from the following information:
| ₹ | |
| Current Assets | 8,60,000 |
| Current Liabilities | 3,40,000 |
| Cost of Revenue from Operations (Cost of Goods Sold) | 20,00,000 |
| Gross Profit | 30% of Cost |
Numerical
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Solution
Working Capital Turnover Ratio = `"Revenue from Operations"/"Working Capital"`
Revenue from Operations = Cost of Revenue from Operations + Gross Profit
= ₹ 20,00,000 + 30% of ₹ 20,00,000
= ₹ 20,00,000 + `30/100 xx ₹ 20,00,000`
= ₹ 20,00,000 + ₹ 6,00,000
= ₹ 26,00,000
Working Capital = Current Assets − Current Liabilities
= ₹ 8,60,000 − ₹ 3,40,000
= ₹ 5,20,000
Working Capital Turnover Ratio = `(₹ 26,00,000)/(₹ 5,20,000)`
= 5 Times
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