What is the denominator to be used while calculating Trade Receivables Turnover Ratio?

Post category:Accountancy
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SOLUTION

Denominator is Average Trade Receivables (or Receivables)
Average Trade Receivables = Opening Trade Receivables + Closing Trade Receivables / 2.

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Rs. 1,75,000 is the Credit Revenue from Operations, i.e., Net Credit Sales of an enterprise. If Trade Receivables Turnover Ratio is 8 times, calculate Trade Receivables in the Beginning and at the end of the year. Trade Receivables at the end is Rs. 7,000 more than that in the beginning.

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