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Question
Calculate Trade Receivables Turnover Ratio from the following information:
| ₹ | |
| Credit Sales | 22,00,000 |
| Cash Received from Debtors | 20,40,000 |
| Discount Allowed | 40,000 |
| Sales Returns | 60,000 |
| Opening Debtors | 4,70,000 |
Numerical
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Solution
Trade Receivables Turnover Ratio = `"Net Credit Revenue from Operations"/"Average Debtors"`
Net Credit Revenue from Operations = Credit Sales − Sales Return
= ₹ 22,00,000 − ₹ 60,000
= ₹ 21,40,000
Closing Debtors = Opening Debtors + Net Credit Sales − Discount Allowed − Cash Received from Debtors
= ₹ 4,70,000 + ₹ 21,40,000 − ₹ 40,000 − ₹ 20,40,000
= ₹ 5,30,000
Average Debtors = `("Opening Debtors" + "Closing Debtors")/2`
= `(₹ 4,70,000 + ₹ 5,30,000)/2`
= `(₹ 10,00,000)/2`
= ₹ 5,00,000
Trade Receivables Turnover Ratio = `(₹ 21,40,000)/(₹ 5,00,000)`
= 4.28 Times
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