Read the following information carefully and answer the next 5 questions:
| PARTICULARS | AMOUNT (₹) |
| Revenue from operations | 8,75,000 |
| Creditors | 90,000 |
| Bills Receivables | 48,000 |
| Bills Payables | 52,000 |
| Purchases | 4,20,000 |
| Trade debtors | 59,000 |
Calculate Trade Receivables Turnover ratio.
Answer & explanation
Correct answer: option 1
The correct answer is option 1- 8.18 times.
Trade receivables turnover ratio = Revenue from operations / Average trade receivables
= 8,75,000/1,07,000
= 8.177 or 8.18 times.
NOTE- There are no opening and closing trade receivables, so whole figure is considered as average trade receivables.
In order to calculate average Trade Receivables as the figures of debtors and bills receivables in the beginning of the year are not available. So when only year-end figures are available use the same as it is.
So, average trade receivables = Bills Receivables + Trade debtors
= 48,000 + 59,000
= 1,07,000
* The liquidity position of the firm depends upon the speed with which trade receivables are realised. This ratio indicates the number of times the receivables are turned over and converted into cash in an accounting period so answer will be in times not percentage.