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Question
Calculate Trade Receivables Turnover Ratio from the following:
| ₹ | |
| Cash Revenue from Operations (Cash Sales) | 3,40,000 |
| Credit Revenue from Operations (Credit Sales) | 6,00,000 |
| Opening Trade Receivables | 75,000 |
| Closing Trade Receivables | 1,25,000 |
Numerical
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Solution
Trade Receivables Turnover Ratio = `"Credit Revenue from Operations (Credit Sales)"/"Average Trade Receivables"`
Average Trade Receivables = `("Opening Trade Receivables" + "Closing Trade Receivables")/2`
= `(₹ 75,000 + ₹ 1,25,000)/2`
= `(₹ 2,00,000)/2`
= ₹ 1,00,000
Trade Receivables Turnover Ratio = `(₹ 6,00,000)/(₹ 1,00,000)`
= 6 Times
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