Question

Calculate the Creditor's Turnover Ratio from the following figures.

Credit purchases during 2005 = Rs. 12,00,000

Creditors + Bills Payables) on 1.1.2005 = Rs. 4,00,000

Creditors + Bills Payables) on 31.12.2005 =Rs. 2,00,000

Options

• 4 times

• 5 times

• 8 times

• 10 times

Answer 1

4 times

Explanation:

Average Creditors = `("Rs". 4 00,000 + "Rs". 2,00,000)/2`

= Rs. 3,00,000

Creditors Turnover Ratio = `"Net Credit purchases"/"Average accounts payable"`

`= ("Rs." 12,00,000)/("Rs." 3,00,000)`

= 4 times.