Blog

Closing Trade Receivables Rs. 1,00,000; Cash Sales being 25% of Credit Sales; Excess of Closing Trade Receivables over Opening Trade Receivables Rs. 40,000; Revenue from Operations, i.e., Net Sales Rs. 6,00,000. Calculate Trade Receivables Turnover Ratio.

SOLUTION

Let Credit Sales be = x
Cash Sales = x + 25 / 100
= 25x / 100

Total Sales = Cash Sales + Credit Sales
6,00,000 = 25x / 100
Or, 125x / 100 = 6,00,000
Or , x × 6,00,000 × 100 / 125 = 4,80,000
Credit Sales = 4,80,000


Closing Trade Receivables = Opening Trade Receivables + 40,000
1,00,000 = Opening Trade Receivables + 40,000
Opening Trade Receivables =  Rs. 60,000

Average receivables = Opening Receivables + Closing Receivables / 2
Average receivables = 1,00,000 + 60,000 / 2
 = Rs. 80,000

Trade receivable turnover ratio = Net sales / Average receivables
Trade receivable turnover ratio = 4,80,000 / 80,000
= 6 Times


Leave a Reply