105 :- Calculate Trade Receivables Turnover Ratio in each of the following alternative cases :
Case 1 : Net Credit Sales Rs 4,00,000; Average Trade Receivables Rs 1,00,000.
Case 2 : Revenue from Operations (Net Sales) Rs 30,00,000; Cash Revenue from Operations,I.e, Cash Sales Rs 6,00,000; Opening Trade Receivables Rs 2,00,000; Closing Trade Receivables Rs 6,00,000.
Case 3 : Cost of Revenue from Operations or Cost of Goods Sold Rs 3,00,000; Gross Profit on Cost 25%; Cash Sales 20% of Total Sales; Opening Trade Receivables Rs 50,000; Closing Trade Receivables Rs 1,00,000.
Case 4 : Cost of Revenue from Operations or Cost of Goods Sold Rs 4,50,000; Gross Profit on Sales 20%; Cash Sales 25% of Net Credit Sales, Opening Trade Receivables Rs 90,000; Closing Trade Receivables Rs 60,000.
Solution :-
Case 1
Trade Receivable Turnover Ratio = Net Credit Revenue from Operation/Average Trade Receivables
= 4,00,000/1,00,000
= 4 Times
Case 2
Net Credit Revenue from Operation = Net Sales – Cash Sales
= 30,00,000 – 6,00,000
= Rs 24,00,000
Average Trade Receivables = Opening Trade Receivables + Closing Trade Receivables/2
= 2,00,000 + 6,00,000/2
= Rs 4,00,000
Trade Receivable Turnover Ratio = Net Credit Revenue from Operation/Average Trade Receivables
= 24,00,000/4,00,000
= 6 Times
Case 3
Gross Profit = 25/100 of Cost of goods sold
= 25/100 x 3,00,000
= Rs 75,000
Gross Profit = Revenue from Operation – Cost of Goods Sold
75,000 = Revenue from Operations – 3,00,000
Revenue from Operations (Net Sales) = Rs 3,75,000
Net Sales = Cash Sales + Credit Sales
3,75,000 = 20/100 x 3,75,000 + Credit Sales
Credit Sales = 3,75,000 – 75,000
Credit Sales = Rs 3,00,000
Inventory Turnover Ratio = Net Credit Revenue from Operations/Average Trade Receivables
= 3,00,000/[(50,000 + 1,00,0000/2]
= 3,00,000/75,000
= 4 Times
Case 4
Gross Profit = Net Revenue from Operations – Cost of Goods Sold
20x/100 = x – 4,50,000
4,50,000 = 80x/100
Net Revenue from Operations (x) = 4,50,000 x 100/80
= Rs 5,62,500
Let Credit sales be y
Net Sales = Cash Sales + Credit Sales
5,62,500 = 25y/100 + y
Credit Sales (y) = 5,62,500 x 100/125
= Rs 4,50,000
Average Trade Receivables = Opening Trade Receivables + Closing Trade Receivables/2
= 90,000 + 60,000/2
= Rs 75,000
Inventory Turnover Ratio = Net Credit Revenue from Operations/Average Trade Receivables
= 4,50,000/75,000
= 6 Times