Capital Employed is ₹ 5,00,000, Working Capital is ₹ 1,00,000, Cost of Revenue from Operations is ₹ 16,00,000, Gross Profit is ₹ 4,00,000. Calculate Fixed Assets Turnover Ratio.
Average Profit = Rs. 2,50,000
Overvaluation of Stock = Rs. 10,000
Actual Average Profit = Rs. 2,50,000 - Rs. 10,000 (Note) = Rs. 2,40,000
Normal Profit = Capital Employed (Investment)...
Inventory Turnover Ratio = `("Cost of Revenue from Operations")/("Average Inventory")`
`= (Rs. 16,80,000)/(Rs. 2,20,000)` = 7.64 Times.
Working Note:
Cost of Revenue from Operations = Revenue from Operations + Gross...
Total Revenue from Operations = Rs. 5,00,000
Gross Profit = `(1)/(4)` on Cost = `(1)/(5)` on Sales*
`= (1)/(5) xx` Rs. 5,00,000 = Rs. 1,00,000
Cost of Revenue from Operations...
(a) Operating Profit Ratio = `("Operating Profit")/("Revenue from Operations")xx100 = ("Rs. 34,000")/("Rs. 2,00,000")xx100`
(b) Working Capital Turnover Ratio = `("Revenue from Operations")/("Working Capital") = ("Rs. 2,00,000")/("Rs. 50,000")`
= 4 Times....