Question

From the given information, calculate:

1. Trade Receivables Turnover Ratio,
2. Current Ratio.

Credit Revenue from Operations	₹ 80,00,000
Debtors	₹ 25,00,000
Bills Receivables	₹ 15,00,000
Total Assets	₹ 50,00,000
10% Debentures	₹ 12,00,000
Creditors	₹ 13,00,000
Bills Payable	₹ 7,00,000

Answer 1

(a) Calculation of Trade Receivables Turnover Ratio:

Total Trade Receivables:

\[\text{Trade Receivables} = \text{Debtors} + \text{Bills Receivables}\]

$$\text{Trade Receivables} = ₹ 25,00,000 + ₹ 15,00,000 = ₹ 40,00,000$$

Ratio Calculation:

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

$$\text{Trade Receivables Turnover Ratio} = \frac{80,00,000}{40,00,000} = 2$$

$$\mathbf{\text{Trade Receivables Turnover Ratio} = 2\text{ Times}}$$

(b) Calculation of Current Ratio:

Current Liabilities:

$$\text{Current Liabilities} = \text{Creditors} + \text{Bills Payable}$$

$$\text{Current Liabilities} = ₹ 13,00,000 + ₹ 7,00,000 = ₹ 20,00,000$$

Current Assets:

Since Debtors and Bills Receivables are the only current assets listed, their combined total represents the total Current Assets:

$${\text{Current Assets} = ₹ 40,00,000}$$

Ratio Calculation:

$$\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}$$

$$\text{Current Ratio} = \frac{40,00,000}{20,00,000} = 2$$

$${\text{Current Ratio} = 2 : 1}$$