Question

closing trade receivables Rs 100000; cash sales being 25%of credit sales; Excess of closing Trade Receivables over opening Trade Receivable Rs 40000; revenue from operations, I.e., Net sales Rs 600000. Calculate Trade Receivables Turnover Ratio​

Answer 1

NET SALES = 6,00,000

CASH SALES = 25% OF CREDIT SALES

IF CREDIT SALES = C

CASH SALES = 0.25 C

CASH SALES + CREDIT SALES = TOTAL SALES

0.25 C + C = 6,00,000

1.25 C = 6,00,000

C = 4,80,000

CREDIT SALES = 4,80,000

CLOSING RECEIVABLES = 1,00,000

EXCESS OF CLOSING VALUE OVER OPENING VALUE = 40,000

OPENING RECEIVABLES = 1,00,000 - 40,000

= 60,000

AVERAGE RECEIVABLES = OPENING VALUE + CLOSING VALUE

                                                                         2

= 60,000 + 1,00,000

                2

= 80,000

RECEIVABLES TURNOVER RATIO = NET CREDIT SALES

                                                          AVERAGE RECEIVABLES

= 4,80,000

   80,000

= 6 TIMES