Page No
4.113:
Question
91:
Closing Trade Receivables `1,20,000, Revenue from Operations `14,40,000. Provision for Doubtful Debts `20,000. Calculate Trade Receivables Turnover Ratio.
Answer:
Closing Trade Receivables = ` 1,20,000
Revenue from Operations = ` 14,40,000
Since, opening trade receivables have not been given we assume closing trade
receivables to be our average trade receivables. Also, the revenue from
operations will be assumed to be revenue from net credit sales.
Trade Receivables Turnover Ratio = Credit Revenue from Operations/Average
Credit receivables
= 14,40,000/1,20,000 = 12 times
Therefore, this higher ratio indicates the rate at which the firm is able to
collect its debt efficiently.
Page No
4.113:
Question
92:
Closing Trade Receivables ` 4,00,000; Cash Sales being 25% of Credit Sales; Excess of Closing Trade Receivables over Opening Trade Receivables ` 2,00,000; Revenue from Operations, i.e., Revenue from Operations, i.e., Net Sales ` 15,00,000. Calculate Trade Receivables Turnover Ratio.
Answer:
|
Let Credit Sales be |
= x |
|
Cash Sales |
=25% of Credit Sale |
|
Cash Sales |
=x×25/100 =25x/100 |
|
Total Sales |
= Cash Sales + Credit Sales |
|
15,00,000 |
=25x/100+x |
|
Or, 125x/100 |
=15,00,000 |
|
Or, x |
=15,00,000×100/125=12,00,000 |
|
Opening Trade Receivables |
= Closing Trade Receivables − 2,00,000 = 4,00,000 − 2,00,000 = 2,00,000 |
|
Average receivables |
= Opening Receivables +Closing Receivables/2 |
|
Average receivables |
= 2,00,000+4,00,000/2=3,00,000 |
|
Trade Receivables Turnover Ratio |
=Net Credit Sales/Average Trade Receivables =12,00,000/3,00,000 =4 |
Therefore, Trades Receivable Turnover Ratio is 4 Times
Page No
4.113:
Question
93:
A firm normally has trade Receivables equal to two months' credit Sales. During the coming year it expects Credit Sales of ` 7,20,000 spread evenly over the year (12 months). What is the estimated amount of Trade Receivables at the end of the year?
Answer:
|
Debt collection period |
=12 Month/ Debtors turnover ratio |
|
2 |
=12/ Debtors turnover ratio |
|
Debtors turnover ratio=6 |
|
|
Debtors turnover ratio |
= Credit sales / Debtors (Closing ) |
|
6 |
=7,20,000/ Debtors (Closing ) |
|
Debtors (Closing ) |
=1,20,000 |
Page No
4.113:
Question
94:
A limited company made Credit Sales of `
4,00,000 during the financial period. If the collection period is 36 days and
year is assumed to be 360 days, calculate:
(i) Trade Receivables Turnover Ratio;
(ii) Average Trade Receivables;
(iii) Trade Receivables at the end when Trade Receivables at the end are more
than that in the beginning by ` 6,000.
Answer:
|
(i) |
Debt collection period |
=360/ trade receivable turnover ratio |
|
|
36 |
=360/ Debtors turnover ratio |
|
|
trade receivable turnover ratio |
= 10 Times |
|
(ii) |
trade receivable turnover ratio |
= Net Credit sales / Average trade receivable |
|
|
10 |
=4,00,000/ Average trade receivable |
|
|
Average trade receivable |
= 4,00,000/10=40,000 |
∴ Closing Trade Receivables = x
+ 6,000
|
|
Average receivables |
= Opening Receivables +Closing
Receivables/2 |
|
|
40,000
|
=x+x+6,000/2
|
|
|
Or,
80,000
|
=2x+6,000
|
|
|
Or,
2x
|
=74,000
|
|
|
Or,
x
|
=37,000
|
∴ Opening Trade Receivables = x = ` 37,000
Closing Trade Receivables = x + 6,000 = 43,000
Page No
4.114:
Question
95:
Calculate Trade Receivables Turnover Ratio in each of the
following alternative cases:
Case 1: Net Credit Sales
`4,00,000; Average Trade Receivables `1,00,000.
Case 2: Revenue from Operations (Net Sales) `30,00,000; Cash
Revenue from Operations, i.e., Cash Sales `6,00,000; Opening
Trade Receivables
`2,00,000; Closing Trade Receivables `6,00,000.
Case 3: Cost of Revenue from Operations or Cost of Goods Sold `3,00,000;
Gross Profit on Cost 25%; Cash Sales 20% of Total Sales; Opening Trade
Receivables `50,000; Closing Trade Receivables `1,00,000.
Case 4: Cost of Revenue from Operations or Cost of Goods Sold `4,50,000;
Gross Profit on Sales 20%; Cash Sales 25% of Net Credit Sales, Opening Trade
Receivables `90,000; Closing Trade Receivables `60,000.
Answer:
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= Opening Trade Receivables + Closing Trade Receivables/2
Average Trade receivables=2,00,000+600,000/2 = 4,00,000
Trade receivable turnover ratio = Net sales/ Average Trade receivables
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= Opening Trade receivables+Closing Trade receivables/2
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=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=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=4,50,000
Credit Sales= a = 4,50,000
Average Trade receivables= Opening Trade
Receivables +Closing Trade Receivables/2
Average Trade receivables=
90,000+60,000/2=75,000
Trade receivable turnover ratio= Net sales/
Average receivables
Trade receivable turnover ratio= 4,75,000/75,000= 6 Times
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