Question

Calculate Working Capital Turnover Ratio from the following particulars:

	₹
Cost of Revenue from Operations	12,00,000
Gross Profit	20% of Revenue from Operations
Share Capital	5,00,000
General Reserve	1,50,000
Surplus, i.e., Balance in Statement of Profit & Loss	(20,000)
Long-term Borrowings	1,40,000
Long-term Provisions	50,000
Non-Current Assets	4,20,000

Answer 1

Let the Revenue from Operations be x.

Revenue from Operations = Cost of Revenue from Operations + Gross Profit

x = ₹ 12,00,000 + `20/100` x

x − `20/100` x = ₹ 12,00,000

`80/100` x = ₹ 12,00,000

x = `(₹ 12,00,000 xx 100)/80`

x (Revenue from Operations) = ₹ 15,00,000

Working Capital = Share Capital + General Reserve + Surplus + Long-term Borrowings + Long-term Provisions − Non-Current Assets

= ₹ 5,00,000 + ₹ 1,50,000 − ₹ 20,000 + ₹ 1,40,000 + ₹ 50,000 − ₹ 4,20,000

= ₹ 4,00,000

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

= `(₹ 15,00,000)/(₹ 4,00,000)`

= 3.75 Times