## 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 sales / Debtors + Bills receivable
Trade receivable turnover ratio = 4,00,000 / 1,00,000

= 4 Times

Case 2

Net Credit Sales = Total Sales − Cash Sales
= 30,00,000 − 6,00,000
= 24,00,000

Average Trade receivables = 2,00,000 + 600,000 / 2
= 4,00,000

Trade receivable turnover ratio = 24,00,000 / 4,00,000
= 6 Times

Case 3

Cost of Goods Sold = 3,00,000
Gross Profit = 25% on Cost
Gross Profit = 25 / 100 × 3,00,000
= 75,000

Total Sales = Cost of Goods Sold + Gross Profit
= 3,00,000 + 75,000
= 3,75,000

Cash Sales = 20% of Total Sales
Cash sales = 3,75,000 × 20 / 100
= 75,000

Credit Sales = Total Sales − Cash Sales
= 3,75,000 − 75,000
= 3,00,000

Average trade receivable = 50,000 + 1,00,000 / 2
= 75,000

Trade receivable turnover ratio = Net sales / Average receivables
Trade receivable turnover ratio = 3,00,000 / 75,000
= 4 Times

Case 4

Let Sales be = x
Gross profit = x × 20 / 100
Gross profit = 20x / 100

Sales = Cost of goods sold + Gross profit
Or. X = 4,50,000 + 20x / 100
Or, x – 20 / 100 = 4,50,000
Or, x = 4,50,000 × 100 / 80
x = 5,62,500

Sales = x = 5,62,500

Let Credit Sales be = a
Cash Sales  = a × 25 / 100
= 25a / 100

Sales = Cash Sales + Credit Sales
Or, 5,62,500 = 25a / 100+a
Or, 5,62,500 = 125a / 100
Or, a = 5,62,500 × 100 / 125
a = 4,50,000

Credit Sales = a = 4,50,000