Question

Calculate Trade Receivables Turnover Ratio from the following information:

	₹
Collection from Trade Receivables	3,20,000
Sales Returns	45,000
Discount Allowed	20,000
Opening Trade Receivables	80,000

Closing Trade Receivables 25% more than Opening Trade Receivables.

Answer 1

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

Closing Trade Receivables = ₹ 80,000 + `25/100 xx ₹ 80,000`

= ₹ 80,000 + ₹ 20,000

= ₹ 1,00,000

Credit Revenue from Operations = Collection from Trade Receivables + Sales Returns + Discount Allowed + Closing Trade Receivables − Opening Trade Receivables

= ₹ 3,20,000 + ₹ 45,000 + ₹ 20,000 + ₹ 1,00,000 − ₹ 80,000

= ₹ 4,05,000

Net Credit Revenue from Operations = Credit Revenue from Operations − Sales Returns

= ₹ 4,05,000 − ₹ 45,000

= ₹ 3,60,000

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

= `(₹ 80,000  + ₹ 1,00,000)/2`

= `(₹ 1,80,000)/2`

= ₹ 90,000

Trade Receivables Turnover Ratio = `(₹ 3,60,000)/(₹ 90,000)`

= 4 Times