Question

Find out Working Capital Turnover Ratio :Cash 20,000, Bills Receivable 10,000, Sundry Debtors 50,000, Stock 40,000,Sundry Creditors + 60.000, Cost of Goods Sold 33,00,000.​

Answer 1

ANSWER :

• ❖ If Cash is Rs. 20,000; Bills Receivable is Rs. 10,000; Sundry Debtors is Rs. 50,000; Stock is Rs. 40,000; Sundry Creditors is Rs. 60,000 and Cost of Goods Sold is Rs. 33,00,000; then Working Capital Turnover Ratio will be 55 times.

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SOLUTION :

❒ Given :-

• Cash = Rs. 20,000

• Bills Receivable = Rs. 10,000

• Sundry Debtors = Rs. 50,000

• Stock = Rs. 40,000

• Sundry Creditors = Rs. 60,000

• Cost of Goods Sold = Rs. 33,00,000.

❒ To Calculate :-

• Working Capital Turnover Ratio = ?

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❒ Calculation :-

Here,

• Cash = Rs. 20,000

• Bills Receivable = Rs. 10,000

• Sundry Debtors = Rs. 50,000

• Stock = Rs. 40,000

∴ Current Assets = Cash + Bills Receivable + Sundry Debtors + Stock

➨ Current Assets = Rs. 20,000 + Rs. 10,000 + Rs. 50,000 + Rs. 40,000

➨ Current Assets = Rs. 1,20,000

And,

• Sundry Creditors = Rs. 60,000

∴ Current Liabilities = Sundry Creditors

➨ Current Liabilities = Rs. 60,000

So,

• ✠ Working Capital = Current Assets - Current Liabilities

➜ Working Capital = Rs. 1,20,000 - Rs. 60,000

➜ Working Capital = Rs. 60,000

Now,

• Cost of Goods Sold = Rs. 33,00,000

• Working Capital = Rs. 60,000

We know that,

• $\dag \: \: \underline{ \boxed{ \rm{ Working \: \: Capital \: \: Turnover \: \: Ratio = \dfrac{ Cost \: \: of \: \: Goods \: \: Sold}{ Working \: \: Capital }}}}$

Using this formula, we get,

• $\bigstar \: \: \sf{ Working \: \: Capital \: \: Turnover \: \: Ratio = \dfrac{ Cost \: \: of \: \: Goods \: \: Sold}{ Working \: \: Capital }}$

$\implies \: \: \sf{ Working \: \: Capital \: \: Turnover \: \: Ratio = \dfrac{Rs. 33,00,000}{Rs. 60,000 }}$

$\therefore \: \: \sf{ Working \: \: Capital \: \: Turnover \: \: Ratio = \underline{55 \: \: times}}$