Question

From the information given below, find out Debtors Turnover of each year:
2013-14
2014-15
₹
Net Credit Sales
2,60,000 3,00,000
Total Debtors
65,000
60,000
If the company increases its debtors turnover for the year 2014-15 to 6 times, what would be the
impact on profitability​

Answer 1

Answer:

4 Times

Explanation:

Average debtors = (Rs. 40,000 + Rs. 1,20,000)/2 = Rs. 80,000

Cash sales = 20% of total sales

= Rs. 4,00,000 x 20%

= Rs. 80,000

Net credit sales = Total sales - Cash sales

= Rs. 4,00,000 - Rs. 80,000

= Rs. 3,20,000

Debtors turnover ratio = Net credit sales/Average debtors

= Rs. 3,20,000/Rs. 80,000

= 4 Times

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