Calculate the Trade Payables Turnover Ratio from the following information-
Total Purchases ₹ 4,50,000
Cash Purchases ₹ 1,50,000
Creditors ₹ 50,000
Bills Payable ₹ 10,000
Answer & explanation
Correct answer: option 4
The correct answer is option 4- 5 times.
Credit Purchases = Total Purchases-Cash Purchases
= 4,50,000-1,50,000
= 3,00,000
In order to calculate average Trade Payables as the figures of creditors and bills payables in the beginning of the year are not available. So when one figure is available, use the same as it is.
Average Trade Payable = Creditors + Bills Payable
= 50,000 + 10,000
= 60,000
Trade Payables Turnover ratio = Net Credit purchases/ Average trade payable
= 3,00,000/60,000
= 5 times