Answers and Solutions

Answer

1. net asset turnover= revenue from operation divided by net assets = 2.1429

revernue from operation = 30,00,000

net assets= assets total- liabilities

assets total=800000+500000+200000+100000+180000+110000+80000+30000=2000000

liabilities= 200000+200000+140000+50000+10000=600000

nets assets= 2000000-600000=1400000

net assets turnover ratio=3000000/140000=2.1429

2. fixed assets turnover ratio= turnover/fixed assets=1.875

turonver/revenue from operations=30,00,000

fixed assets=800000+500000+200000+100000(plant and machinery to furniture)= 1600000

ratio= 3000000/1600000=1.875

3. working capital turnover ratio= turnover/working capital=15

turnover=30,00,000

working capital= current assets-current liability

current assets=inventory to cash=180000+110000+80000+30000=400000

current liability=creditor to outstanding expenses=140000+50000+10000=200000

working capital=400000-200000=200000

working capital turnover ratio=3000000/200000=15

Answer

Solution:

Given

Revenue from Operation or Sales (Net)=Rs.30,00,000

1.Net Asset Turnover Ratio=Net Sales/Capital Employed

To Find capital employed =Share Capital +Reserves and Surplus+ Long Term Debts

·       Share Capital includes both Equity and Preference Share Capital= (4,00,000+6,00,000)

·       R&S=General Reserve +Balance in Statement of P&L = (1,00,000+3,00,000)

·       Long Term Debts =Debentures and Loan (2,00,000+2,00,000)

·       The Total Capital Employed Will be =Rs.18,00,000

Hence, Net Asset Turnover Ratio=30,00,000/18,00,000= 1.67 Times

2. Fixed Asset Turnover Ratio=Net Sales/Net Fixed Assets

Fixed Assets = Plant & Machinery+ Land & Building+ Motor Car+ Furniture

                        = 8,00,000+5,00,000+2,00,000+1,00,000

                        =16,00,000

Hence, Fixed Asset Turnover Ratio=30,00,000/16,00,000= 1.88 Times

3. Working Capital Turnover Ratio=Net Sales/Net Working Capital

Working Capital = Current Assets – Current Liabilities

·       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

Hence, Working Capital Turnover Ratio=30,00,000/2,00,000= 15 Times