Question

From the following information obtained from the books of Raja Ltd. calculate:

1. Trade Receivables Turnover Ratio, and
2. Trade Payables Turnover Ratio.

Information:	(₹)
Revenue from operations	15,00,000
Creditors	2,00,000
Bills receivable	79,000
Bills Payable	87,000
Debtors	2,21,000
Purchases	11,48,000

Answer 1

Trade Receivables Turnover Ratio = `"Net Credit Revenue from Operation"/"Average Trade Receivables"`

= `(15,00,000)/(3,00,000)`

= 5 Times

Average trade receivables = Bills Receivables + Debtors

= ₹ 79,000 + ₹ 2,21,000

= ₹ 3,00,000

Working Notes: 

1. As credit Revenue cannot be ascertained, so it has been assumed all sales in made as credit.
2. As opening BR and Debtors are not given, so closing debtor and BR are used as average trade receivables.

Trade Payables Turnover Ratio = `"Net Credit Purchase"/"Average Trade Payables"`

= `(11,48,000)/(2,87,000)`

= 4 Times

Note: It is assumed that purchase given is credit purchase.