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
Dear student
Working capital turnover ratio =( revenue from operation/working capital)
= (25,00,000/5,00,000) (from working note 1 and 2)
= 5 times
working notes
1) let the cost is x
= 5 times
working notes
1) let the cost is x
Gross profit = 5,00,000
25% of x = 5,00,000
x = (5,00,000 × 100)/25
x = 20,000 × 100
x = (5,00,000 × 100)/25
x = 20,000 × 100
x = 20,00,000
REvenue from operation = cost of good sold + groos profit
Rs.20,00,000 + 5,00,000
Rs25,00,000
Working capital =equity + long term debts + reserves and surplus - non current assets
REvenue from operation = cost of good sold + groos profit
Rs.20,00,000 + 5,00,000
Rs25,00,000
Working capital =equity + long term debts + reserves and surplus - non current assets
Working capital = 10,00,000 + 2,00,000 + 3,00,000 - 10,00,000
= 5,00,000
regards
= 5,00,000
regards