Advertisements
Advertisements
Question
A company earns Gross Profit of 25% on cost. For the year ended 31st March, 2017 its Gross Profit was ₹ 5,00,000; Equity Share Capital of the company was ₹ 10,00,000; Reserves and Surplus ₹ 2,00,000; Long-term Loan ₹ 3,00,000 and Non-current Assets were ₹ 10,00,000.
Compute the 'Working Capital Turnover Ratio' of the company.
Solution
Working Capital Turnover Ratio= Revenue from Operation/Working Capital
Gross Profit = 25% on Cost
Let Cost of Goods sold be ₹ 100.
Gross Profit = ₹ 25
Revenue from Operations = ₹ (100 + 25) = ₹ 125
When Gross profit is ₹ 25, revenue from operations is= ₹ 125
And, if Gross profit is ₹ 5,00,000 then revenue from operations will be= ₹ (5,00,000 × 125/25) = ₹ 25,00,000
Capital Employed = Shareholder’s Funds + Non-Current Liabilities
= ₹ (10,00,000 + 2,00,000 + 3,00,000) = ₹ 15,00,000
Also, Capital Employed = Non Current Assets + Working Capital
Alternatively, Working Capital = Capital Employed – Non-current Assets = ₹ (15,00,000 – 10,00,000)= ₹ 5,00,000
Hence, Working Capital Turnover Ratio= 25,00,000/5,00,000= 5 times
APPEARS IN
RELATED QUESTIONS
From the following information calculate Gross Profit Ratio, Inventory Turnover Ratio and Trade Receivables Turnover Ratio.
| Rs | |
| Revenue from Operations | 3,00,000 |
| Cost of Revenue from Operations | 2,40,000 |
| Inventory at the end | 62,000 |
| Gross Profit | 60,000 |
| Inventory in the beginning | 58,000 |
| Trade Receivables | 32,000 |
Calculate Inventory Turnover Ratio from the data given below:
|
|
Rs |
|
Inventory in the beginning of the year |
10,000 |
|
Inventory at the end of the year |
5,000 |
|
Carriage |
2,500 |
|
Revenue from Operations |
50,000 |
|
Purchases |
25,000 |
Calculate Current Ratio from the following information:
| Particulars | ₹ |
Particulars |
₹ |
||
| Total Assets | 5,00,000 | Non-current Liabilities | 1,30,000 | ||
| Fixed Tangible Assets | 2,50,000 | Non-current Investments | 1,50,000 | ||
| Shareholders' Funds | 3,20,000 |
|
|
||
Calculate Debt to Equity Ratio: Equity Share Capital ₹ 5,00,000; General Reserve ₹ 90,000; Accumulated Profits ₹ 50,000; 10% Debentures ₹ 1,30,000; Current Liabilities ₹ 1,00,000.
From the following information, calculate Proprietary Ratio:
|
Particulars |
Note No. |
Amount |
|
I. EQUITY AND LIABILITIES 1. Shareholders' Funds |
|
|
|
(a) Share Capital |
|
6,00,000 |
|
(b) Reserves and Surplus |
|
1,50,000 |
|
2. Current Liabilities |
|
|
|
(a) Trade Payables |
|
1,00,000 |
|
(b) Other Current Liabilities |
|
50,000 |
|
(c) Short-term Provisions (Provision for Tax) |
|
1,00,000 |
|
Total |
|
10,00,000 |
|
II. ASSETS |
|
|
|
1. Non-Current Assets |
|
|
|
Fixed Assets (Tangible Assets) |
|
5,00,000 |
|
2. Current Assets |
|
|
|
(a) Current Investments |
|
1,50,000 |
|
(b) Inventories |
|
1,00,000 |
|
(c) Trade Receivables |
|
1,50,000 |
|
(d) Cash and Cash Equivalents |
|
1,00,000 |
|
Total |
|
10,00,000 |
From the following information, calculate Interest Coverage Ratio:
| ₹ | |
| 10,000 Equity Shares of ₹10 each | 1,00,000 |
| 8% Preference Shares | 70,000 |
| 10% Debentures | 50,000 |
| Long-term Loans from Bank | 50,000 |
| Interest on Long-term Loans from Bank | 5,000 |
| Profit after Tax | 75,000 |
| Tax | 9,000 |
Closing Trade Receivables ₹ 1,00,000; Cash Sales being 25% of Credit Sales; Excess of Closing Trade Receivables over Opening Trade Receivables ₹ 40,000; Revenue from Operations, i.e., Net Sales ₹ 6,00,000. Calculate Trade Receivables Turnover Ratio.
Calculate Trade payables Turnover Ratio from the following information:
Opening Creditors ₹ 1,25,000; Opening Bills Payable ₹ 10,000; Closing Creditors ₹ 90,000; Closing bills Payable ₹ 5,000; Purchases ₹ 9,50,000; Cash Purchases ₹ 1,00,000; Purchases Return ₹ 45,000.
Calculate Trade Payables Turnover Ratio for the year 2018-19 in each of the alternative cases:
Case 1 : Closing Trade Payables ₹ 45,000; Net Purchases ₹ 3,60,000; Purchases Return ₹ 60,000; Cash Purchases ₹ 90,000.
Case 2 : Opening Trade Payables ₹ 15,000; Closing Trade Payables ₹ 45,000; Net Purchases ₹ 3,60,000.
Case 3 : Closing Trade Payables ₹ 45,000; Net Purchases ₹ 3,60,000.
Case 4 : Closing Trade Payables (including ₹ 25,000 due to a supplier of machinery) ₹ 55,000; Net Credit Purchases ₹ 3,60,000.
From the following, calculate Gross Profit Ratio:
Gross Profit:₹50,000; Revenue from Operations ₹5,00,000; Sales Return: ₹50,000.
Net Profit before Interest and Tax ₹4,00,000; 15% Long-term Debt ₹8,00,000; Shareholders' Funds ₹4,00,000. Calculate Return on Investment.
Choose the appropriate alternative from the given options:
Bishan and Sudha were partners in firm sharing profits and losses in the ratio of 5 : 3. Alena was admitted as a new partner. It was decided that the new profit sharing ratio of Bishan, Sudha, and Alena will be 10: 6: 5. The sacrificing ratio of Bishan and Sudha will be:
Current ratio is stated as a crude ratio because:
Calculate 'Liquid Ratio' from the following information:
Current Liabilities Rs. 50,000, Current Assets Rs. 80,000, Stock Rs.25,000, Prepaid Expenses Rs.5,000
The current ratio is 2:1
State giving reasons which of the following transactions would improve, reduce and not change the current ratio.
"Payment of dividend."
Inventory Turnover Ratio can be calculated as ______?
The important activity ratios calculated under Activity (or Turnover) Ratios are ______?
The ______ measures the activity of a firm's inventory.
X Ltd. has a Debt-Equity Ratio of 3 : 1. According to the management, it should be maintained at 1 : 1. What are the choices in front of management to do so?
Debt to Capital Employed ratio is 0.3:1. State whether the following transaction, will improve, decline or will have no change on the Debt to Capital Employed Ratio. Also give a reason for the same.
Purchased Goods on Credit for ₹ 1,00,000 for a credit of 15 months, assuming operating cycle is of 18 months.
