Read the following information and answer the question.
Trade Receivables Turnover Ratio = 4 times
Gross Profit Ratio = 20%
Gross Profit for the year was ₹5,00,000
Bills Receivables = ₹60,000
Net Profit (after) Tax Ratio 12%
Tax Rate is 50%
10% Long-term Borrowings = ₹12,00,000
Shareholders' Funds are ₹ 4,00,000
Non-current Liabilities are ₹18,00,000
Sale of goods on credit only.
How much amount will trade debtors make?
Answer & explanation
Correct answer: option 3
The correct answer is option 3- ₹5,65,000.
Gross profit = 20%
20% = ₹5,00000
So, sales = 5,00,000 x 100/20
= ₹25,00,000
Trade Receivable Turnover ratio = Net Credit Revenue from Operations/Average Trade Receivable
Trade Receivables Turnover Ratio = 4 times
Trade receivables = 25,00,000/4
= ₹6,25,000
Trade debtors = Trade receivables - bills receivables
= 6,25,000 - 60,000
= ₹5,65,000