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 collection period is -
Answer & explanation
Correct answer: option 2
The correct answer is option 2- 45 days.
Average Trade Receivable = Trade debtors + Bills receivable
= 59,000 + 48,000
= 1,07,000
Trade Receivable Turnover Ratio = Net Credit Revenue from operations / Average Trade Receivable
= 8,75,000/1,07,000
= 8.177 times or 8.18 times
Average collection period = 365/ Trade Receivable Turnover Ratio
= 365/8.177
= 44.62 or 45 days