Question

On the basis of following data, the Working Capital Turnover Ratio of a company will be:

Liquid Assets ₹ 3,70,000; Inventory ₹ 80,000; Current Liabilities ₹ 1,50,000; Cost of revenue from operations ₹ 7,50,000.

Options

• 2.5 Times

• 3 Times

• 5 Times

• 3.8 Times

Answer 1

2.5 Times

Explanation:

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

Current Assets = Liquid Assets + Inventory

= 3,70,000 + 80,000

= ₹ 4,50,000

Working Capital = Current Assets − Current Liabilities

= 4,50,000 − 1,50,000

= ₹ 3,00,000

Working Capital Turnover Ratio = `(7,50,000)/(3,00,000)`

= 2.5 Times