Question

Calculate Trade Receivables Turnover Ratio from the following:

	₹
Total Revenue from Operations for the year (Total Sales)	4,80,000
Cash Revenue from Operations (Cash Sales): being 20% of Credit Revenue from Operations
Opening Trade Receivables	60,000
Excess of Closing Trade Receivables over Opening Trade Receivables	30,000

Answer 1

Trade Receivables Turnover Ratio = `"Credit Revenue from Operations (Credit Sales)"/"Average Trade Receivables"`

Let the Credit Revenue from Operations be x.

Total Sales = Cash Revenue from Operations + Credit Revenue from Operations

₹ 4,80,000 = `20/100` x + x

`20/100` x + x = ₹ 4,80,000

`120/100` x = ₹ 4,80,000

x (Credit Revenue from Operations) = `(₹ 4,80,000 xx 100)/120`

= ₹ 4,00,000

Opening Trade Receivables = ₹ 60,000

Closing Trade Receivables = ₹ 60,000 + ₹ 30,000

= ₹ 90,000

Average Trade Receivables = `("Opening Trade Receivables" + "Closing Trade Receivables")/2`

= `(₹ 60,000 + ₹ 90,000)/2`

= `(₹ 1,50,000)/2`

= ₹ 75,000

Trade Receivables Turnover Ratio = `(₹ 4,00,000)/(₹ 75,000)`

= 5.33 Times