Question

Calculate Trade Receivables Turnover Ratio from the following:

	₹
Total Revenue from Operations for the year (Total Sales)	12,00,000
Credit Revenue from Operations (Credit Sales): 70% of Total Revenue from Operations
Revenue from Operations Returns (Sales Returns) (out of Credit Revenue from Operations)	40,000
Opening Trade Receivables	73,250
Closing Trade Receivables	86,750

Answer 1

Trade Receivables Turnover Ratio = `"Net Credit Revenue from Operations (Credit Sales)"/"Average Trade Receivables"`

Credit Revenue from Operations = 70% of Total Revenue from Operations

= `70/100 xx ₹ 12,00,000`

= ₹ 8,40,000

Net Credit Revenue from Operations = Credit Revenue from Operations − Sales Returns

= ₹ 8,40,000 − ₹ 40,000

= ₹ 8,00,000

Average Trade Receivables = `("Opening Trade Receivables" + "Closing Trade Receivables")/2`

= `(₹ 73,250  + ₹ 86,750)/2`

= `(₹ 1,60,000)/2`

= ₹ 80,000

Trade Receivables Turnover Ratio = `(₹ 8,00,000)/(₹ 80,000)`

= 10 Times