SOLUTION
Working Capital Turnover Ratio = Revenue from Operation / Working Capital
Gross Profit = 25% on Cost
Let Cost of Goods sold be Rs. 100.
Gross Profit = Rs. 25
Revenue from Operations = (100 + 25) = Rs. 125
When Gross profit is Rs. 25, revenue from operations is = Rs. 125
And, if Gross profit is Rs. 5,00,000 then revenue from operations will be = Rs. (5,00,000 × 125 / 25) = Rs. 25,00,000
Capital Employed = Shareholder’s Funds + Non-Current Liabilities
= (10,00,000 + 2,00,000 + 3,00,000)
= Rs. 15,00,000
Also,
Capital Employed = Non-Current Assets + Working Capital
Alternatively, Working Capital = Capital Employed – Non-current Assets
= (15,00,000 – 10,00,000)
= Rs. 5,00,000
Hence, Working Capital Turnover Ratio = 25,00,000 / 5,00,000
= 5 times