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Question
Calculate Trade Receivables Turnover Ratio from the following information:
| 31st March,2018 (₹) | 31st March,2019 (₹) | |
| Sundry Debtors | 28,000 | 25,000 |
| Bills Receivable | 7,000 | 15,000 |
| Provision for Doubtful Debts | 2,800 | 2,500 |
Total Sales ₹ 1,00,000; Sales Return ₹ 1,500; Cash Sales ₹ 23,500.
Sum
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Solution
Net Credit Sales = Total Sales − Sales Return − Cash Sales
= 1,00,000 − 1,500 − 23,500 = 75,000
Average Receivable
= `("Opening Debtors + Opening Bills Receivable + Closing Debtors + Closing Bills Receivable")/2`
Average Receivable = `(28000 + 7000 + 25000 + 15000)/2` = Rs 37500
Trade Receivable Turnover Ratio = `"Net Credit Sales"/"Average Trade Receivables"`
Trade Receivables Turnover Ratio = `75000/37500` = 2 times
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