Question

Q5. Calculate: i) Trade Receivables Turnover Ratio
ii) Trade Payables Turnover Ratio
iii) Average Collection Period
iv) Average Payment Period
Information Available :
Credit Sales Rs. 8,00,000
Creditors Rs. 90,000
Bills Receivable Rs. 45,000
Bills Payable Rs. 50,000
Credit PurchasesRs. 4,20,000
Debtors Rs. 55,000​

Answer 1

Trade receivable turnover ratio(TRTR) = Net credit sales / Avg. trade receivables

= 800000/(45000+55000)

= 800000/ 100000

= 8 times

Average collection period = No. of days in a year/TRTR

= 365/8

=42.6 days

Trade payables turnover ratio(TPTR) = Net credit purchases / Avg. trade payables

= 420000/(90000+50000)

= 420000/140000

= 3 times

Avg. payment period = No. of days in a year/ TPTR

=365/3

= 121.67 days