Question
Compute Working Capital Turnover Ratio using the following information:
| Particulars | Amount (Rs) |
| Cash Sales | 1,30,000 |
| Credit Sales | 3,80,000 |
| Sales Returns | 10,000 |
| Liquid Assets | 1,40,000 |
| Current Liabilities | 1,05,000 |
| Inventory | 90,000 |
Solution
Working capital Turnover ratio = Net sales/Working capital.
Net sales = Total sales - sales return
(1,30,000 + 3,80,000) – 10,000 = 5,00,000
Working capital = Current assets - current liabilities
= (1,40,000 + 90,000) - 1,05,000 = 1,25,000
Working capital turnover ratio = 5,00,000/1,25,000 = 4 times.
