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Trade Receivables Turnover Ratio

Average trade...

Question

Average trade receivables =

A

$\frac{Closing Debtors and Bills Receivable}{2}$

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B

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

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C

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

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D

None of these

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Solution

The correct option is B
$\frac{(Opening Debtors and Bills Receivable + Closing Debtors and Bills Receivable)}{2}$

$Trade Receivables Turnover Ratio = \frac{(Opening Debtors and Bills Receivable + Closing Debtors and Bills Receivable)}{2}$

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Q. A limited company made Credit Sales of ₹ 4,00,000 during the financial period. If the collection period is 36 days and year is assumed to be 360 days, calculate:
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(iii) Trade Receivables at the end when Trade Receivables at the end are more than that in the beginning by ₹ 6,000.

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Q. Calculate Trade Receivables Turnover Ratio in each of the following alternative cases:
Case 1: Net Credit Sales ₹4,00,000; Average Trade Receivables ₹1,00,000.
Case 2: Revenue from Operations (Net Sales) ₹30,00,000; Cash Revenue from Operations, i.e., Cash Sales ₹6,00,000; Opening Trade Receivables ₹2,00,000; Closing Trade Receivables ₹6,00,000.
Case 3: Cost of Revenue from Operations or Cost of Goods Sold ₹3,00,000; Gross Profit on Cost 25%; Cash Sales 20% of Total Sales; Opening Trade Receivables ₹50,000; Closing Trade Receivables ₹1,00,000.
Case 4: Cost of Revenue from Operations or Cost of Goods Sold ₹4,50,000; Gross Profit on Sales 20%; Cash Sales 25% of Net Credit Sales, Opening Trade Receivables ₹90,000; Closing Trade Receivables ₹60,000.

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