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Question
A firm normally has trade Receivables equal to two months' credit Sales. During the coming year it expects Credit Sales of ₹ 7,20,000 spread evenly over the year (12 months). What is the estimated amount of Trade Receivables at the end of the year?
Solution
Debts Collection Period = `(12 "months")/"Debtors Turnover Ratio"`
`2 = 12/"Debtors Turnover Ratio"`
Debtors Turnover Ratio = 6 times
Debtors Turnover Ratio = `"Credit Sales"/"Debtors at the end"`
`6 = 720000/"Debtors at the end"`
Debtors at the end = Rs 120000
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₹ |
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|
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| ₹ | ||
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