Question

From the following information, calculate the Net Assets Turnover Ratio:

Equity Share Capital ₹ 15,00,000; Long-term Borrowings ₹ 30,00,000; Reserves and Surplus 5,00,000; Non-current Assets ₹ 32,00,000; Revenue from Operations ₹ 1,00,00,000.

Answer 1

Calculation of Shareholders’ Funds:

\[\text{Shareholders' Funds} = \text{Equity Share Capital} + \text{Reserves and Surplus}\]

$$\text{Shareholders' Funds} = ₹ 15,00,000 + ₹ 5,00,000 = ₹ 20,00,000$$

Calculation of Capital Employed (Net Assets):

$$\text{Capital Employed} = \text{Shareholders' Funds} + \text{Long-term Borrowings}$$

$$\text{Capital Employed} = ₹ 20,00,000 + ₹ 30,00,000$$

$${\text{Capital Employed} = ₹ 50,00,000}$$

Calculation of Net Assets Turnover Ratio:

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

$$\text{Net Assets Turnover Ratio} = \frac{1,00,00,000}{50,00,000} = 2$$

Net Assets Turnover Ratio = 2 Times