Question

Total Revenue from Operations ₹ 12,00,000; Credit Revenue from Operations ₹ 9,00,000; Opening Debtors ₹ 90,000; Closing Debtors ₹ 1,10,000; Provision for Doubtful Debts ₹ 20,000. Trade Receivables Turnover Ratio will be ______.

Options

• 10 times

• 9 times

• 12 times

• 13.3 times

Answer 1

Total Revenue from Operations ₹ 12,00,000; Credit Revenue from Operations ₹ 9,00,000; Opening Debtors ₹ 90,000; Closing Debtors ₹ 1,10,000; Provision for Doubtful Debts ₹ 20,000. Trade Receivables Turnover Ratio will be 9 times.

Explanation:

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

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

= `(90,000 + 1,10,000)/2`

= `(2,00,000)/2`

= ₹ 1,00,000

Trade Receivables Turnover Ratio = `(9,00,000)/(1,00,000)`

= 9 times