Question
A company records Net Sales of ₹60,00,000, of which
50% are on credit. The opening receivables were ₹2,00,000 and the closing receivables were ₹4,00,000. Calculate the Receivables Turnover Ratio.Solution
The formula is: Receivables Turnover Ratio=Average Receivables/Credit Sales • Credit Sales = ₹60,00,000 × 50% = ₹30,00,000 • Average Receivables = (₹2,00,000 + ₹4,00,000) ÷ 2 = ₹3,00,000 Now, Receivables Turnover Ratio=30,00,0003,00,000=8.00 timesReceivables Turnover Ratio=3,00,00030,00,000 =8.00times Thus, the company’s Receivables Turnover Ratio = 8.00 times.
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