Question

Capital Employed ₹ 2,50,000, Working Capital ₹ 50,000, Cost of Revenue from Operations ₹ 8,00,000, Gross Profit ₹ 2,00,000. Calculate the Fixed Assets Turnover Ratio.

Answer 1

Calculation of Total Revenue from Operations:

$$\text{Revenue from Operations} = \text{Cost of Revenue from Operations} + \text{Gross Profit}$$

\[\text{Revenue from Operations} = ₹ 8,00,000 + ₹ 2,00,000\]

$${\text{Revenue from Operations} = ₹ 10,00,000}$$

Calculation of Net Fixed Assets:

Using the Capital Employed components approach:

$$\text{Capital Employed} = \text{Net Fixed Assets} + \text{Working Capital}$$

$$2,50,000 = \text{Net Fixed Assets} + 50,00,000$$

$$\text{Net Fixed Assets} = ₹ 2,50,000 - ₹ 50,000$$

$${\text{Net Fixed Assets} = ₹ 2,00,000}$$

Calculation of Fixed Assets Turnover Ratio:

$$\text{Fixed Assets Turnover Ratio} = \frac{\text{Revenue from Operations}}{\text{Net Fixed Assets}}$$

$$\text{Fixed Assets Turnover Ratio} = \frac{10,00,000}{2,00,000} = 5$$

Fixed Assets Turnover Ratio = 5 Times