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Question
Calculate Trade Payables Turnover Ratio and Average Debt payment Period from the following information:
| 1st April, 2018 ₹ |
31st March, 2019 ₹ |
|
| Sundry Creditors | 1,50,000 | 4,50,000 |
| Bills Payable | 50,000 | 1,50,000 |
Total Purchases ₹ 21,00,000; Purchases Return ₹ 1,00,000; Cash Purchases ₹ 4,00,000.
Sum
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Solution
Average Trade Payables = `("Opening Creditors & B/P" + "Closing Creditors & B/P")/2`
`= (150000 + 50000 + 450000 + 150000)/2` = Rs 400000
Net Credit Purchases = Total Purchases − Purchases Return − Cash Purchases
= 21,00,000 − 1,00,000 − 4,00,000 = Rs 16,00,000
Trade Receivable Turnover Ratio = `"Net Credit Sales"/"Average Trade Receivables"`
`= 1600000/400000` = 4 times
Average Debt Payment Period = `12/"Trade Payable Turnover Ratio" = 12/4` = 3 Months
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