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Question
From the following information, calculate Working Capital Turnover Ratio:
| Gross Profit Ratio | 25% |
| Gross Profit | ₹ 5,00,000 |
| Shareholders Funds | ₹ 25,00,000 |
| Non-current liabilities | ₹ 8,00,000 |
| Non-current Assets | ₹ 23,00,000 |
Numerical
Solution
Gross Profit Ratio = `"Gross Profit"/"Revenue from Operations (RFO)" xx 100`
25 = `(5,00,000)/("RFO")xx 100`
RFO = `(5,00,000)/25 xx 100`
= ₹ 20,00,000
Capital employed (From Equity and Liabilities side) = Shareholders' funds + Non Current liabilities
= 25,00,000 + 8,00,000
= ₹ 33,00,000
Capital employed (from Asset side) = Non Current Assets + Working Capital
33,00,000 = 23,00,000 + Working Capital
Working Capital = 33,00,000 − 23,00,000
= ₹ 10,00,000
Working Capital Turnover Ratio = `"RFO"/"Working Capital"`
= `(20,00,000)/(10,00,000)`
= 2 times
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