Question

Total Revenue from Operations ₹ 27,00,000; Credit Revenue from Operations ₹ 18,00,000; Opening Debtors ₹ 3,20,000; Closing Debtors ₹ 4,00,000; Provision for Doubtful Debts ₹ 60,000. Trade Receivables Turnover Ratio will be ______.

Options

• 7.5 times

• 9 times

• 6 times

• 5 times

Answer 1

Total Revenue from Operations ₹ 27,00,000; Credit Revenue from Operations ₹ 18,00,000; Opening Debtors ₹ 3,20,000; Closing Debtors ₹ 4,00,000; Provision for Doubtful Debts ₹ 60,000. Trade Receivables Turnover Ratio will be 5 times.

Explanation:

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

= `(3,20,000 + 4,00,000)/2`

= `(7,20,000)/2`

= ₹ 3,60,000

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

= `(18,00,000)/(3,60,000)`

= 5 times