111 : Calculate Trade Payables Turnover Ratio and Average Debt Payment Period from the following information :
Total Purchases Rs 21,00,000; Purchases Return Rs 1,00,000; Cash Purchases Rs 4,00,000.
Solution :-
Net Credit Purchases = Total Purchases – Cash Purchases – Purchase Return
= 21,00,000 – 4,00,000 – 1,00,000
= Rs 16,00,000
Average Trade Payables = Opening Creditors + Closing Creditors + Opening Bills Payables + Closing Bills Payables/2
= 1,50,000 + 4,50,000 + 50,000 + 1,50,000/2
= 8,00,000/2
= Rs 4,00,000
Trade Payables Turnover Ratio = Net Credit Purchases/Average Trade Payables
= 16,00,000/4,00,000
= 4 Times
Average Debt Payment Period = Months in a year/Trade Payable Turnover Ratio
= 12/4
= 3 Months