(a) A company earns Gross Profit of 25% on cost. For the year ended 31st March, 2017 its Gross Profit was Rs. 5,00,000, Equity Share Capital of the company was Rs. 10,00,000, Reserves and Surplus Rs. 2,00,000, Long-termLoan Rs. 3,00,000 and Non-current Assets were Rs. 10,00,000.
Compute the 'Working Capital Turnover Ratio' of the company.
(b) Y Ltd.'s profit after interest and tax was Rs. 1,00,000. Its Current Assets were Rs. 4,00,000, Current Liabilities Rs. 2,00,000, Fixed Assets Rs. 6,00,000 and 10% Long-term Debt Rs. 4,00,000. The rate of tax was 20%.
Calculate 'Return on Investment' of Y Ltd.

Solution :(a) WorkingCapital Turnover Ratio = `("Revenue from Operations or Net Sales")/("Working Capital")`
`=("Rs. 25,00,000")/("Rs. 5,00,000")` = 5 Times.
Working Notes:
Let the cost = Rs. 100, Gross Profit = Rs. 25, Sales = Rs. 100 + Rs. 25 = Rs. 125
When Gross Profit is Rs. 25, Sales = Rs. 125
When Gross Profit is Rs. 5,00,000, Sales - Rs. 5,00,000 `xx` Rs. 125/Rs. 25
Revenue from Operations or Sales = Rs. 25,00,000.
2. Working Capital EMPLOYED - Non-current Assets
Or
(Equity Share Capital + RESERVES and Surplus + Long-term Loan) - Non-current Assets
= Rs. 10,00,000 + Rs. 2,00,000 + Rs. 3,00,000 - Rs. 10,00,000 = Rs. 5,00,000.
(B) Return on Investment = `("Net Profit before Interest and Tax")/("Capital Employed")xx100`
`=("Rs. 1,65,000")/("Rs. 8,00,000")xx100=20.63%`.
Working Notes:
Calculation of Net Profit before Interest and Tax:Rs.
Profit after interest and Tax (given)1,00,000
Profit after Interest but before tax (Rs. 1,00,000 `xx` 100/80)1,25,000
ADD: Interest on Long-term DEBT (10% of Rs. 4,00,000)40,000
Net Profit before Interest and Tax1,65,000
2. Capital Employed = Current Assets + Fixed Assets - Current Liabilities
= Rs. 4,00,000 + Rs. 6,00,000 - Rs. 2,00,000 = Rs. 8,00,000.