Question

Closing Trade Receivables ₹ 4,00,000; Cash Sales being 25% of Credit Sales; Excess of Closing Trade Receivables over Opening Trade Receivables ₹ 2,00,000; Revenue from Operations, i.e., Revenue from Operations, i.e., Net Sales ₹ 15,00,000. Calculate Trade Receivables Turnover Ratio

[Hint: 1. Net Credit Sales = Total Sales − Cash Sales

2. Opening Trade Receivables = Closing Trade Receivables − Excess of Closing Trade Receivables over Opening Trade Receivables.]

Answer 1

Let Credit Sales be = x

Total Sales = Cash Sales + Credit Sales

Opening Trade Receivables = Closing Trade Receivables − 2,00,000

= 4,00,000 − 2,00,000 = 2,00,000

$$\begin{gathered} \mathrm{Trade}\mathrm{Receivables}\mathrm{Turnover}\mathrm{Ratio}=\frac{\mathrm{Net}\mathrm{Credit}\mathrm{Sales}}{\mathrm{Average}\mathrm{Trade}\mathrm{Receivables}} \\ =\frac{12,00,000}{3,00,000} \\ =4 \\ \mathrm{Therefore},\mathrm{Trades}\mathrm{Receivable}\mathrm{Turnover}\mathrm{Ratio}\mathrm{is}4\mathrm{Times} \end{gathered}$$