Closing Trade Receivables Rs. 1,20,000, Revenue from Operations Rs. 14,40,000. Provision for Doubtful Debts Rs. 20,000. Calculate Trade Receivables Turnover Ratio.

SOLUTION

Closing Trade Receivables = Rs. 1,20,000
Revenue from Operations = Rs. 14,40,000

Since, opening trade receivables have not been given we assume closing trade receivables to be our average trade receivables. Also, the revenue from operations will be assumed to be revenue from net credit sales.

Trade Receivables Turnover Ratio = Credit Revenue from Operations / Average Credit receivables
= 14,40,000 / 1,20,000
= 12 times

Therefore, this higher ratio indicates the rate at which the firm is able to collect its debt efficiently.