Question

Capital Employed ₹ 12,00,000; Net Fixed Assets ₹ 8,00,000; Cost of Goods Sold or Cost of Revenue from Operations ₹ 40,00,000; Gross Profit is 20% on Cost. Calculate Working Capital Turnover Ratio.

Hint: Working Capital = Capital Employed − Net Fixed Assets

Answer 1

Cost of Goods Sold = 40,00,000

Gross Profit = 20% of Cost

∴ Gross Profit =`20/100 xx 4000000 = 800000`

Total Sales = Cost of Goods Sold + Gross Profit

= 4000000 + 800000 = 4800000

Working Capital = Capital Employed − Net Fixed Assets

= 1200000 − 800000 = 400000

Working Capital Turnover Ratio = `"Net Sales"/"Working Capital"`

`= 4800000/400000` = 12 times