Read the passage carefully and answer the next five questions (value in fraction is to be rounded off to the nearest value).
| Particulars | Amount (₹) |
| Revenue from operations | 8,75,000 |
| Creditors | 90,000 |
| Bills receivable | 48,000 |
| Bills payable | 52,000 |
| Purchases | 4,20,000 |
| Trade debtors | 59,000 |
Average payment period is......
Answer & explanation
Correct answer: option 3
The correct answer is option 3- 123 days.
Trade Payable Turnover Ratio = Purchases / Average Trade Payables
= 4,20,000/1,42,000
= 2.96 times
Average Payment Period = 365/Trade Payables Turnover Ratio
= 365/2.96 times
= 123.31 or 123 days