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    Question

    A company has Net Sales of ₹500 crore and Receivables

    of ₹50 crore. Its Debtors Turnover Ratio is 10. What does it imply about the firm's collection efficiency?
    A Receivables are too high Correct Answer Incorrect Answer
    B Collection cycle is 36.5 days Correct Answer Incorrect Answer
    C Bad debts are not recorded Correct Answer Incorrect Answer
    D Inventory holding is high Correct Answer Incorrect Answer
    E Profit margins are excellent Correct Answer Incorrect Answer

    Solution

    Debtors Turnover = Net Sales / Receivables = 500 / 50 = 10 Collection Period = 365 / 10 = 36.5 days Indicates efficient collection of outstanding dues within ~1 month.

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