From the following information, calculate (i) Net assets turnover, (ii) Fixed assets turnover, and (iii) Working capital turnover ratios :
| Particulars | Amount (₹) | Particulars | Amount (₹) |
|---|---|---|---|
| Preference shares capital | 4,00,000 | Plant and Machinery | 8,00,000 |
| Equity share capital | 6,00,000 | Land and Building | 5,00,000 |
| General reserve | 1,00,000 | Motor Car | 2,00,000 |
| Balance in Statement of Profit and Loss | 3,00,000 | Furniture | 1,00,000 |
| 15% debentures | 2,00,000 | Inventory | 1,80,000 |
| 14% Loan | 2,00,000 | Debtors | 1,10,000 |
| Creditors | 1,40,000 | Bank | 80,000 |
| Bills payable | 50,000 | Cash | 30,000 |
| Outstanding expenses | 10,000 |
Revenue from operations for the year 2016-17 were ₹30,00,000
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Start your 14-day free trial to unlock the full solution →Given: Revenue from Operations for 2016-17 = ₹30,00,000, along with the balances listed in the question.
Step 1 — Capital Employed
Capital Employed = Share Capital + Reserves and Surplus + Long-term Debts
= (₹4,00,000 + ₹6,00,000) + (₹1,00,000 + ₹3,00,000) + (₹2,00,000 + ₹2,00,000)
= ₹10,00,000 + ₹4,00,000 + ₹4,00,000 = ₹18,00,000
Step 2 — Net Fixed Assets
Fixed Assets = Plant and Machinery + Land and Building + Motor Car + Furniture
= ₹8,00,000 + ₹5,00,000 + ₹2,00,000 + ₹1,00,000 = ₹16,00,000
Step 3 — Working Capital
Current Assets = Inventory + Debtors + Bank + Cash = ₹1,80,000 + ₹1,10,000 + ₹80,000 + ₹30,000 = ₹4,00,000
Current Liabilities = Creditors + Bills payable + Outstanding expenses = ₹1,40,000 + ₹50,000 + ₹10,000 = ₹2,00,000
Working Capital = Current Assets – Current Liabilities = ₹4,00,000 – ₹2,00,000 = ₹2,00,000
Step 4 — The three ratios
(i) Net Assets Turnover Ratio = Revenue from Operations ÷ Capital Employed = ₹30,00,000 ÷ ₹18,00,000 = 1.67 times …
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