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Question
Determine the value of Current Liabilities of Y Ltd. from the following:
| Cost of Revenue from Operations | ₹ 6,00,000 |
| Gross Profit | 25% on Revenue from Operations |
| Current Assets | ₹ 2,50,000 |
| Working Capital Turnover Ratio | 5 Times |
Numerical
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Solution
Gross Profit = 25% on Revenue from Operations
It means, if Revenue from Operations = ₹ 100
Gross Profit = ₹ 25
Cost of Revenue from Operations = ₹ 75
If Cost of Revenue from Operations is ₹ 6,00,000
Revenue from Operations = `100/75 xx ₹ 6,00,000`
= ₹ 8,00,000
Working Capital Turnover Ratio = `"Revenue from Operations"/"Working Capital"`
5 = `(₹ 8,00,000)/"Working Capital"`
Working Capital = `(₹ 8,00,000)/5`
= ₹ 1,60,000
Working Capital = Current Assets − Current Liabilities
₹ 1,60,000 = ₹ 2,50,000 − Current Liabilities
Current Liabilities = ₹ 2,50,000 − ₹ 1,60,000
= ₹ 90,000
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