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Average Debtors ₹ 1,80,000 Working Capital Turnover Ratio 8 times Cash Revenue from Operations 25% of Revenue from Operations Gross Profit Ratio 3313% What is the revenue from operations? -

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Question

Read the following hypothetical extract of ABC Ltd. and answer the question that follows:

The following information is given:

Trade Receivables Turnover Ratio 4 times
Current Liabilities ₹ 5,000
Average Debtors ₹ 1,80,000
Working Capital Turnover Ratio 8 times
Cash Revenue from Operations 25% of Revenue from Operations
Gross Profit Ratio `33 1/3%`

What is the revenue from operations?

Options

  • ₹ 9,60,000

  • ₹ 6,40,000

  • ₹ 1,80,000

  • ₹ 7,20,000

MCQ

Solution

₹ 9,60,000

Explanation:

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

4 = `"Credit Revenue from Operations"/(1,80,000)`

Credit Revenue from Operations = ₹ 1,80,000 × 4 = ₹ 7,20,000

Credit Revenue from Operations = 75% of Revenue from Operations

₹ 7,20,000 = 75% of Revenue from Operations

Revenue from Operations = ₹ 9,60,000

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Activity Ratios - Trade Receivables Turnover Ratio
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