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Question
What relationship will be established to study:
Trade Receivables Turnover
Answer in Brief
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Solution
It expresses the relationship between credit revenue from operations and trade receivable. It is calculated as follows:
Trade Receivable Turnover ratio = `"Net Credit Revenue from Operations"/"Average Trade Receivable"`
Where Average Trade Receivable = `("Opening Debtors and Bills Receivable" + "Closing Debtors and Bills Receivable")/2`
It needs to be noted that debtors should be taken before making any provision for doubtful debts.
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