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Question
The credit revenue from operations of Velavan Ltd, amounted to ₹ 10,00,000. Its debtors and bills receivables at the end of the accounting period amounted to ₹ 1,10,000 and ₹ 1,40,000 respectively. Calculate trade receivables turnover ratio and also collection period in months.
Solution
Trade receivable Turnover ratio = `"Credit revenue from Operations"/"Average trade receivables"`
Average trade receivables = `("Opening trade receivables + Closing trade receivables")/2`
Trade receivable = Trade Debtors + Bills receivable
Inventory Turnovers Ratio = `1000000/250000` = 4 times
Average Trade receivable
= 1,10,000 + 1,40,000
= Rs. 2,50,000
Debt collection period = `"Number of months in a year"/"Trade receivable turnover ratio"`
`= 12/4` = 3 months
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| 2. Non- Current liabilities | |
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