Question

From the following information, calculate Trade Receivables Turnover Ratio:

Cost of Revenue from Operations (Cost of Goods Sold): Rs. 6,00,000 Gross Profit on Cost: 25% Cash Sales: 20% of Total Sales Opening Debtors: Rs. 1,00,000 Closing Debtors: Rs. 2,00,000. Provision for Doubtful Debts: Opening Rs. 10,000 and Closing Rs. 20,000.

Answer 1

Trade Receivables Turnover Ratio

= `"Credit Revenue from Operations"/"Average Trade Receivables"`

`= (6,00,000)/(1,50,000)`

= 4 times

Revenue From Operations = Cost of Revenue from Operations + Gross Profit

= 6,00,000 + 1,50,000

= 7,50,000

Cash Revenue from Operations:

= 20% of Revenue From Operations

= 20% of 7,50,000

= 1,50,000

Credit Revenue from Operations:

= Revenue from operations – Cash Revenue from operations

= 7,50,000 – 1,50,000

= 6,00,000

Average Trade Receivables

= `("Opening Trade Rec. + Closing Trade Rec.") / 2` 

= `(1,00,000 + 2,00,000)/2` 

= 1,50,000