Question

Read the following hypothetical extract of ABC Ltd. and answer the question that follows:

The following information is given:

Trade Receivables Turnover Ratio	4 times
Current Liabilities	₹ 5,000
Average Debtors	₹ 1,80,000
Working Capital Turnover Ratio	8 times
Cash Revenue from Operations	25% of Revenue from Operations
Gross Profit Ratio	`33 1/3%`

What is the working Capital?

Options

• ₹ 1,20,000

• ₹ 1,80,000

• ₹ 3,20,000

• ₹ 2,40,000

Answer 1

₹ 1,20,000

Explanation:

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

8 = `(9,60,000)/"Working Capital"`

Working Capital = `(9,60,000)/8` = ₹ 1,20,000