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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
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.
Gross Profit = 25% on Cost. Let Cost of Goods Sold = ₹100, so Gross Profit = ₹25, and Revenue from Operations = 100 + 25 = ₹125.
When Gross Profit is ₹25, Revenue from Operations is ₹125.
When Gross Profit is ₹5,00,000, Revenue from Operations = 5,00,000 × 125/25 = ₹25,00,000
Capital Employed = Shareholders’ Funds + Non-Current Liabilities
= (10,00,000 + 2,00,000) + 3,00,000 = ₹15,00,000
Working Capital = Capital Employed − Non-current Assets = 15,00,000 − 10,00,000 = ₹5,00,000
Working Capital Turnover Ratio = 25,00,000 ÷ 5,00,000 = 5 times
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Vol 3 Chapter 4 Q.122 - Accounting Ratios", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 4 - Accounting Ratios.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
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