Question

Determine working capital turnover ratio if, current assets is Rs 1,50,000, current liabilities is Rs 1,00,000 and revenue from operations is Rs 3,00,000.

A. 4 Times

B. 2 times

C. 6 times

D. None of these

Answer 1

The working capital turnover ratio is calculated by dividing revenue from operations by working capital. In this case, the ratio is 6 times, which suggests that for every unit of working capital, the company generates six units of revenue.

Step-by-step explanation:

The question asks to calculate the working capital turnover ratio, which measures how efficiently a company uses its working capital to generate revenue from operations. To calculate the ratio, you need to know the company's current assets, current liabilities, and revenue from operations. Here is the calculation:

Working Capital = Current Assets - Current Liabilities
= Rs 1,50,000 - Rs 1,00,000
= Rs 50,000

Working Capital Turnover Ratio = Revenue from Operations / Working Capital
= Rs 3,00,000 / Rs 50,000
= 6 times

Therefore, the working capital turnover ratio is 6 times, which means the company generates six times its working capital in revenue from operations.