Question

Opening Trade Receivables ₹ 3,60,000; Cash Revenue from Operations being 20% of Credit Revenue from Operations. Excess of Closing Trade Receivables over Opening Trade Receivables ₹ 60,000. Cost of Revenue from Operations ₹ 18,00,000; Gross Profit ₹ 5,40,000. Calculate Trade Receivables Turnover Ratio.

Answer 1

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

= ₹ 18,00,000 + ₹ 5,40,000

= ₹ 23,40,000

Let the Credit Revenue from Operations be x.

Total Revenue from Operations = Cash Revenue from Operations + Credit Revenue from Operations

₹ 23,40,000 = `20/100 x + x` 

`120/100 x` = ₹ 23,40,000

`x` = `(₹ 23,40,000 xx 100)/120`

Credit Revenue from Operations `(x)` = ₹ 19,50,000

Closing Trade Receivables = ₹ 3,60,000 + ₹ 60,000

= ₹ 4,20,000

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

= `(₹ 3,60,000  + ₹ 4,20,000)/2`

= `(₹ 7,80,000)/2`

= ₹ 3,90,000

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

= `(₹ 19,50,000)/(₹ 3,90,000)`

= 5 Times