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Question
What relationship will be established to study:
Trade Receivables Turnover
Solution
It expresses the relationship between credit revenue from operations and trade receivable. It is calculated as follows:
Trade Receivable Turnover ratio = `"Net Credit Revenue from Operations"/"Average Trade Receivable"`
Where Average Trade Receivable = `("Opening Debtors and Bills Receivable" + "Closing Debtors and Bills Receivable")/2`
It needs to be noted that debtors should be taken before making any provision for doubtful debts.
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| Rs. | |
| Equity Share Capital | 75,000 |
| Preference Share Capital | 25,000 |
| General Reserve | 45,000 |
| Balance in the Statement of Profits and Loss | 30,000 |
| Debentures | 75,000 |
| Trade Payables | 40,000 |
| Outstanding Expenses | 10,000 |
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Calculate Trade payables Turnover Ratio from the following information:
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| ₹ | |
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| Cost of Revenue from Operations (Cost of Goods Sold) | 2,00,000 |
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| ₹ | ||
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Additional information:
| Particulars | 31.3.2019 (₹) |
31.3.2018 (₹) |
| Trade Receivables | 78,800 | 52,000 |
| Prepaid Expenses | 3,000 | 2,000 |
| Trade Payables | 51,000 | 30,000 |
| Expenses Payable | 20,000 |
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