Question

Fixed Assets ₹ 3,00,000; Liquid Assets ₹ 1,80,000; Inventory ₹ 70,000; Current Liabilities ₹ 50,000; Cost of Revenue from Operations ₹ 8,00,000; G.P. 25% of Cost. Working Capital Turnover Ratio will be ______.

Options

• 2 times

• 4.8 times

• 4 times

• 5 times

Answer 1

Fixed Assets ₹ 3,00,000; Liquid Assets ₹ 1,80,000; Inventory ₹ 70,000; Current Liabilities ₹ 50,000; Cost of Revenue from Operations ₹ 8,00,000; G.P. 25% of Cost. Working Capital Turnover Ratio will be 5 times.

Explanation:

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

= 8,00,000 + `25/100 xx 8,00,000`

= 8,00,000 + 2,00,000

= ₹ 10,00,000

Current Assets = 1,80,000 + 70,000

= ₹ 2,50,000

Working Capital = Current Assets − Current Liabilities

= 2,50,000 − 50,000

= ₹ 2,00,000

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

= `(10,00,000)/(2,00,000)`

= 5 times