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Question
Following particulars are related to Fast Cargo Ltd.:
| ₹ | ₹ | |
| Trade Payables | 1,40,000 | |
| Trade Receivables | 2,10,000 | 2,00,000 |
| Less: Provision for Doubtful Debts | 10,000 | |
| Inventory (Excluding Loose Tools ₹ 20,000) | 1,49,000 | |
| Goodwill | 50,000 | |
| Cash and Bank balance | 36,000 | |
| Bank Overdraft | 20,000 | |
| Marketable Securities | 80,000 | |
| Outstanding Expenses | 10,000 | |
| Provision for Tax | 30,000 | |
| Prepaid Rent | 3,000 | |
| Cost of Revenue from Operations | 6,30,000 |
Gross profit 25% on Revenue from Operations.
Trade Receivables Turnover Ratio will be:
Options
4.2 times
4 times
3.94 times
3.75 times
MCQ
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Solution
4 times
Explanation:
Gross Profit is 25% on Revenue from Operations.
Hence, Goods costing ₹ 75 must have been sold for ₹ 100.
Revenue from Operation = `6,30,000 xx 100/75`
= ₹ 8,40,000
Trade Receivables Turnover Ratio = `"Revenue from Operation"/"Trade Receivables"`
= `(8,40,000)/(2,10,000)`
= 4 times
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