what does returns out of credit revenue from operations mean while calculating Trade Receivables Turnover Ratio.

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Solution

Tushar, Credit Revenue from Operations means Credit Sales. Thus, Return out of Credit Revenue from Operations implies Sales Return.

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Revenue from Operations (Net Sales)	10,00,000
Credit Revenue from Operations (Credit Sales)	8,00,000
Trade Receivables	1,00,000

(a) From the following calculate 'Trade Receivables Turnover Ratio'.

Total Revenue from operation for year Rs 8,40,000.

Cash Revenue from operation-40% of credit revenue from operation.

Closing Trade Receivable over Opening Trade Receivable by Rs 80,000. Opening Trade Receivables in 20% of credit Revenue from operation.

(b) From the following, calculate Interest Coverage Ratio.

Profit after Interest and Tax Rs 4,97,000.

Rate of Income Tax 30%.

12% Debentures Rs 6,00,000.

Calculate the amount of Opening Trade Receivables and Closing Trade Receivables from the following figures :

Trade Receivables Turnover Ratio 4 times

Cost of Revenue from Operations (Cost of Goods Sold) Rs. 6,40,000

Gross Profit Ratio 20%

Closing Trade Receivables were Rs. 20,000 more than at the beginning.

Cash Revenue from Operations being 33 $\frac{1}{3}$ % of Credit Revenue from Operations.

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