Question

Closing Trade Payables ₹ 5,40,000, Net Purchases ₹ 43,20,000. Cash Purchases ₹ 10,80,000. Calculate Trade Payables Turnover Ratio.

Answer 1

Calculation of Net Credit Purchases:

\[\text{Net Credit Purchases} = \text{Net Purchases} - \text{Cash Purchases}\]

$$\text{Net Credit Purchases} = ₹ 43,20,000 - ₹ 10,80,000$$ 
$${\text{Net Credit Purchases} = ₹ 32,40,000}$$

Calculation of Average Trade Payables:

Since only Closing Trade Payables are given and opening details are unavailable, the Closing Trade Payables value is considered as the Average Trade Payables.

$${\text{Average Trade Payables} = ₹ 5,40,000}$$

Calculation of Trade Payables Turnover Ratio:

$$\text{Trade Payables Turnover Ratio} = \frac{\text{Net Credit Purchases}}{\text{Average Trade Payables}}$$

$$\text{Trade Payables Turnover Ratio} = \frac{32,40,000}{5,40,000} = 6$$

Trade Payables Turnover Ratio = 6 Times