Question : Working Capital turnover ratio will be -
|
Particulars |
Amount |
|
Current assets |
500000 |
|
Current Liabilities |
100000 |
|
Revenue from operation |
2800000 |
Option 1: 7 Times
Option 2: 5.8 times
Option 3: 8 times
Option 4: 10 times
Correct Answer: 7 Times
Solution : By dividing the firm's net annual sales by its typical working capital, one can determine the working capital turnover ratio. Total Liabilities for Total Assets is subtracted to get Working Capital.
Hence the working capital turnover will be -
Working capital = Current assets - Current liabilities
= Rs.500000 - Rs.100000
= Rs.400000
Turnover = Rs.2800000
= Turnover / Working Capital
= Rs.2800000/Rs.400000
= 7 Times
Hence the correct answer is option 1.
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