Question

Rate of gross profit on cost of company is 25% its gross profit is rs 500000 it's shareholders fund are 12 lakh current liability are rs 300000 and current assets are rs 10 lakh calculate its working capital turnover ratio

Answer 1

Answer:2.8 times

Explanation:

Let RFO be x

A.T.Q.

Gross Profit = 25% of RFO

=x/4 ......................(1)

Also, G.P= 500000

Put in (1)

We will get RFO = ₹2000000

Also, working capital= Current Assets - current liabilities

.•. W.C= 1000000-300000

= ₹700000

Working capital turnover ratio= RFO/W.C

= 2000000/700000

= 2.8 times