Question

Q. 74. Calculate Working Capital Turnover Ratio from the following information: Inventory 3,10,000. trade receivable 1,30,000 cash 20,000. trade Payables 60,000 cost of revenue from Operations 30,40,000 g.p. 24\% of Revenue from Operations ​

Answer 1

Answer:

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Explanation:

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Answer 2

Given:

• Inventory = Rs 3,10,000
• Trade receivables = Rs 1,30,000
• Cash = Rs 20,000
• Trade payables = Rs 60,000
• Cost of RFO [Revenue From Operations] = Rs 30,40,000
• Gross profit = 24% of RFO

To find: The working capital turnover ratio.

Answer:

Working capital turnover ratio = Revenue from operations ÷ Working capital

Both the RFO and working capital aren't directly given to us. We need to calculate them from the data given to us.

Calculation of Revenue From Operations:

Revenue from operations = Cost of revenue from operations + Gross profit

As per the question,

RFO = Rs 30,40,000 + (24% × RFO)

RFO = Rs 30,40,000 + (24/100 × RFO)

RFO - (24/100 × RFO) = Rs 30,40,000

(100(RFO) - 24(RFO))/100 = Rs 30,40,000

76(RFO)/100 = Rs 30,40,000

76(RFO) = Rs 30,40,00,000

RFO = Rs 30,40,00,000 ÷ 76

RFO = Rs 40,00,000

We have the RFO.

We now need the working capital.

Calculation of the working capital:

Working capital = Current assets - Current liabilities

Current assets = Inventory + Trade receivables + Cash

Current assets = Rs 3,10,000 + Rs 1,30,000 + Rs 20,000

Current assets = Rs 4,60,000

Current liabilities = Trade payables

Current liabilities = Rs 60,000

Working capital = Rs 4,60,000 - Rs 60,000

Working capital = Rs 4,00,000

We now have both the RFO and the working capital.

Calculation of the Working Capital Turnover Ratio:

Working capital turnover ratio = Rs 40,00,000 ÷ Rs 4,00,000

Working capital turnover ratio = 10 times

Therefore, the working capital turnover ratio is 10 times.