Question

Closing Trade Receivables ₹ 90,000, Revenue from Operations ₹ 7,20,000, Cash Revenue from Operations ₹ 1,80,000. Provision for Doubtful Debts ₹ 8,000. Calculate Trade Receivables Turnover Ratio.

Answer 1

Calculation of Net Credit Revenue from Operations:

\[\text{Net Credit Revenue} = \text{Total Revenue from Operations} - \text{Cash Revenue from Operations}\]

$$\text{Net Credit Revenue} = ₹ 7,20,000 - ₹ 1,80,000$$

$${\text{Net Credit Revenue} = ₹ 5,40,000}$$

Calculation of Average Trade Receivables:

Since only Closing Trade Receivables are given in the problem and information for opening balances is unavailable, the Closing Trade Receivables are treated as the Average Trade Receivables.

$${\text{Average Trade Receivables} = ₹ 90,000}$$

Calculation of Trade Receivables Turnover Ratio:

$$\text{Trade Receivables Turnover Ratio} = \frac{\text{Net Credit Revenue from Operations}}{\text{Average Trade Receivables}}$$

$$\text{Trade Receivables Turnover Ratio} = \frac{5,40,000}{90,000} = 6$$

Trade Receivables Turnover Ratio = 6 Times