Trade Receivables Turnover Ratio

Q.

Determine debtors turnover ratio if, closing debtors is Rs 40, 000, total sales is Rs 4, 00, 000. Credit sales is 25% of total sales and excess of closing debtors over opening debtors is Rs 30, 000.

1. 4 Times

2. 2 times

3. 6 times

4. 8 times

Q. From the following Information, calculate Inventory Turnover Ratio:
Credit Revenue from Operations ₹ 3, 00, 000; Cash Revenue from Operations ₹ 1, 00, 000, Gross Profit 25% of Cost, Closing Inventory was 3 times the Opening Inventory. Opening Inventory was 10% of Cost of Revenue from Operations.

Q. From the following information, calculate Inventory Turnover Ratio:

	₹
Revenue from Operations	16, 00, 000
Average Inventory	2, 20, 000
Gross Loss Ratio 5%

Q.

From the following information, calculate inventory turnover ratio; Revenue from Operations (Sales) Rs. 16, 00, 000; Average Inventory Rs. 2, 20, 000; Gross Loss Ratio 5%.

Q.

Trade Receivables Turnover ratio =

1. Revenue from Operations/Trade Receivable

2. Net Credit Revenue from Operations/Average Trade Receivable

3. Net Credit Revenue from Operations/Average Trade payables

4. None of these

Q. A partnership firm earned net profits during the past three years as follows:

Year ended	31st March, 2018	31st March, 2017	31st March, 2016
Net Profit (₹)	2, 30, 000	2, 00, 000	1, 70, 000

Capital investment in the firm throughout the above-mentioned period has been ₹ 4, 00, 000. Having regard to the risk involved, 15% in considered to be a fair return on the capital. The remuneration of the partners during this period is estimated to be ₹ 1, 00, 000 p.a.
Calculate value of goodwill on the basis of two years purchase of average super profit earned during the above-mentioned three years.

Q.

The _________ is useful in evaluating credit and collection policies.

1. average payment period

2. average collection period

3. current asset turnover

4. current ratio

Q.

Who are the users of financial ratio analysis? Explain the significance of ratio analysis to them?

Q.

Receivables Turnover ratio is also known as ___

1. Debtors turnover ratio

2. Debtors velocity

3. Both :

   Debtors turnover ratio

   Debtors velocity

4. None of these

Q.

In general, a lower turnover ratio highlights the under utilization of the resources accessible at the disposal of the firm. True or False

1. True

2. False

Q.

State the accounting treatment for

(i) Unrecorded assets

(ii) Unrecorded liabilities.

Q.

Average trade receivables =

1. $\frac{\text{Closing Debtors and Bills Receivable}}{2}$

2. $\frac{\text{Opening Debtors and Bills Receivable}}{2}$

3. $\frac{\text{(Opening Debtors and Bills Receivable + Closing Debtors and Bills Receivable)}}{2}$

4. None of these

Q. Prepare a trading and profit and loss account of M/s Green Club Ltd for the year ending December 31, 2010 from the following figures taken from his trial balance

Account Title	Amt. (Rs.)	Account Title	Amt. (Rs.)
Opening Stock	35, 000	Sales	2, 50, 000
Purchase	1, 25, 000	Purchase Return	6, 000
Return Inwards	25, 000	Creditors	10, 000
Postage and Telegram	600	Bills payable	20, 000
Salary	12, 300	Discount	1, 000
Wages	3, 000	Provision for Bad Debts	4, 500
Rent and Rates	1, 000	Interest Received	5, 400
Packing and Transport	500	Capital	75, 000
General Expenses	400
Insurance	4, 000
Debtors	50, 000
Cash in Hand	20, 000
Cash at Bank	40, 000
Machinery	20, 000
Lighting and Heating	5, 000
Discount	3, 500
Bad Debts	3, 500
Investment	23, 100
	3, 71, 900		3, 71, 900

Adjustments
1. Depreciation charged on machinery @ 5% pa.
2. Further bad debts Rs. 1, 500, discount on debtors @ 5% and make a provision on debtors @ 6%.
3. Wages prepaid Rs. 1, 000.
4. Interest on investment @ 5% pa.
5. Closing stock Rs. 10, 000.

Q.

Number of days or months / Trade receivables turnover ratio is used for calculating ___

1. Average collection period

2. Debtors velocity

3. Average payment period

4. None of these

Q. Trade receivables turnover ratio is a/an ratio.

1. profitability
2. activity
3. solvency
4. liquidity

Q.

The following Balance Sheet and other information, calculate following ratios:

(i) Debt-Equity Ratio (ii) Working Capital Turnover Ratio (iii) Trade Receivables Turnover Ratio

Balance Sheet as at March 31, 2017
Particulars	Note No.	Rs.
I. Equity and Liabilities:
1. Shareholders’ funds
a) Share capital		10, 00, 000
b) Reserves and surplus		9, 00, 000
2. Non-current Liabilities
a) Long-term borrowings		12, 00, 000
3. Current Liabilities
a) Trade payables		5, 00, 000
Total		36, 00, 000
II. Assets
1. Non-current Assets
a) Fixed assets
Tangible assets		18, 00, 000
2. Current Assets
a) Inventories		4, 00, 000
b) Trade Receivables		9, 00, 000
c) Cash and cash equivalents		5, 00, 000
Total		36, 00, 000

Additional Information: Revenue from Operations Rs. 18, 00, 000 Calculate:

ii) Working Capital Turnover Ratio

(Debt-Equity Ratio 0.63:1; Working Capital Turnover Ratio 1.39 times; Trade Receivables Turnover Ratio 2 times)

Q.

Trade receivables turnover ratio is expressed in terms of ___

1. Days

2. None of these

3. Percentage

4. Times

Q. The firm of Harry, Potter and Ali, who have been sharing profits in the ratio of 2 : 2 : 1, have existed for same years. Ali wants that he should get equal share in the profits with Harry and Potter and he further wishes that the change in the profit-sharing ratio should come into effect retrospectively were for the three years. Harry and Potter have agreement on this account. The profits for the last three years were: Year 2015-16, 2016-17 & 2017-18 Profit Rs. 2, 20, 000 2, 40, 000 2, 90, 000. Show adjustment of profits by means of a single adjustment Journal entry.

Q. Liquidity ratio is also known as :-
a. Quick ratio
b. Acid test ratio
c. Working capital ratio
d. Stock turnover ratio

1. A and B
2. A and C
3. B and C
4. C and D

Q. Trade Receivable Turnover Ratio is expressed in .

1. pure ratio
2. times
3. percentage
4. days

Q. From the following information obtained from the books of Kundan Ltd., calculate the inventory turnover ratio for the years 2015-16 and 2016-17:

	2015-16 Rs.	2016-17 Rs.
Inventory on 31st March	$7,00,000$	$17,00,000$
Revenue from operations	$50,00,000$	$75,00,000$

(Gross profit is $25$% on cost of revenue from operations)
In the year 2015-16, inventory increased by Rs. $2,00,000$

Q.

Q. From the following particulars of JEE Ltd. calculate trade receivable turnover ratio.

Particulars	Amount (₹)
Revenue from Operations Cash revenue from operations Trade receivable at the beginning of the year Trade receivable at the end of the year	10, 00, 000 4, 50, 000 20, 000 24, 000

[2 marks]

1. 50 times
2. 25 times
3. 72.5 times
4. 18.75 times

Q. Equipment was purchased on $1st$ January $2012$ for Rs$25,000$ and is to be depreciated at $30\%$ based on reducing balance method. If the company closes its books of account on $31st$ March every year, what would be the net book value of the equipment as at $31st$ December $2013$?

1. Rs$12,250$
2. Rs$10,000$
3. Rs$17,750$
4. Rs$12,545$

Q. Trade receivables turnover ratio defined as the ratio to the average trade receivables.

1. credit purchases
2. total turnover
3. purchases
4. net credit sales

Q. Find the goodwill of the firm using capitalisation, method from the following information:
Total Capital Employed in the firm Rs.8, 00, 000;
Reasonable Rate of Return 15%;
Profits for the year Rs. 12, 00, 000.

1. $Rs.42,00,000$
2. $Rs.12,00,000$
3. $Rs.72,00,000$
4. $Rs.82,00,000$

Q. The profits and losses for the last years are : 2001-02 Losses Rs.8, 000; 2002-03 Losses Rs.4, 500; 2003-04 Profits Rs.1, 00, 000 & 2004-05 Profits Rs.74, 000.The average capital employed in the business is Rs.2, 40, 000. The rate of return expected from capital invested as 10%. The remuneration of partners is estimated to be Rs.1, 000 per month. Calculate the value of goodwill on the basis of two years' purchase of super profits base on the average of four years.

1. $Rs.8,500$
2. $Rs.8.750$
3. $Rs.9,000$
4. $Rs.8,250$

Q. Which of the following ratios is a favorable indication, if it is low?

1. Operating ratio
2. Operating profit ratio
3. Inventory turnover ratio
4. Fixed assets turnover ratio

Q. A firm has an average profit of Rs 60, 000. Rate of return on capital employed is 12.5% p.a. Total capital employed is Rs 4, 00, 000. Goodwill is to be calculated on the basis of two years purchase of super profit. Find the amount of goodwill?

1. Rs 15, 000
2. Rs 10, 000
3. Rs 20, 000
4. None

Q. Quick ratio of a company is 1.5:1. State with reason, whether the purchase of inventory for cash will improve, reduce or not change in the ratio.