Question

Calculate Trade Receivables Turnover Ratio from the following data: \begin{itemize} \item Total Revenue from Operations: ₹4,00,000 \item Closing Trade Receivables: ₹1,00,000 \item Excess of Closing Trade Receivables over Opening: ₹40,000 \item Cash Revenue = 25% of Credit Revenue \end{itemize}

• A. 3 times
• B. 6 times
• C. 4 times
• D. 5 times

Hint:

Always convert total revenue into credit revenue when cash revenue is part of the mix. Then apply the ratio formula.

Answer 1

The Correct Option is C

Step 1: Separate credit revenue.
Let credit revenue be ₹ x. Then cash revenue = 0.25x. So total revenue = \(x + 0.25x = 1.25x = 4,00,000 \Rightarrow x = ₹3,20,000\) Step 2: Find average trade receivables.
Closing = ₹1,00,000,
Opening = ₹1,00,000 - ₹40,000 = ₹60,000
\[ \text{Average Trade Receivables} = \frac{1,00,000 + 60,000}{2} = ₹80,000 \] Step 3: Apply the formula. \[ \text{Trade Receivables Turnover Ratio} = \frac{\text{Credit Revenue}}{\text{Average Trade Receivables}} = \frac{3,20,000}{80,000} = 4 \text{ times} \]