From the following information, calculate Trade Receivables Turnover Ratio: Cost of Revenue from Operations (Cost of Goods Sold) : Rs. 6,00,000 Gross Profit on Cost : 25% Cash Sales: 20% of Total Sales Opening Debtors: Rs. 1,00,000 Closing Debtors : Rs. 2,00,000. Provision for Doubtful Debts: Opening Rs. 10,000 and Closing Rs.20,000.
Solution :-
Revenue From Operations = Cost of Revenue from Operations + Gross Profit
= 6,00,000 + 1,50,000
= Rs 7,50,000
Cash Revenue from Operations = 20% of Revenue From Operations
= 20% of 7,50,000
= Rs 1,50,000
Credit Revenue from Operations = Revenue from operations – Cash Revenue from operations
= 7,50,000 – 1,50,000
= Rs 6,00,000
Average Trade Receivables = (Opening Trade Rec. + Closing Trade Rec.) / 2
= (1,00,000 + 2,00,000)/2
= Rs 1,50,000
Trade Receivables Turnover Ratio = Credit Revenue from Operations / Average Trade Receivables
= 6,00,000/1,50,000
= 4 times