Question

Credit Revenue from Operations of Star Ltd is ₹ 5,20,000, Closing Trade Receivables are ₹ 80,000, and Opening Trade Receivables are 3/4th of Closing Trade Receivables.

Trade Receivables Turnover Ratio of Star Ltd. will be ______

Options

• 4 Times

• 4.25 Times

• 7.43 Times

• 4.75 Times

Answer 1

Credit Revenue from Operations of Star Ltd is ₹ 5,20,000, Closing Trade Receivables are ₹ 80,000, and Opening Trade Receivables are 3/4th of Closing Trade Receivables.

Trade Receivables Turnover Ratio of Star Ltd. will be 7.43 Times.

Explanation:

Opening Trade Receivables:

\[\text{Opening Trade Receivables} = \frac{3}{4} \times 80,000 = ₹ 60,000\]

Calculate Average Trade Receivables:

$$\text{Average Trade Receivables} = \frac{60,000 + 80,000}{2} = ₹ 70,000$$

Calculation of Trade Receivables Turnover Ratio:

$$\text{Trade Receivables Turnover Ratio} = \frac{\text{Credit Revenue from Operations}}{\text{Average Trade Receivables}} = \frac{5,20,000}{70,000} \approx 7.43\text{ Times}$$