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Question 81 Chapter 4 of +2-B
Interest Coverage Ratio
81.Closing Trade Receivables Rs. 1,00,000; Cash Sales being 25% of Credit
Sales; Excess of Closing Trade Receivables over Opening Trade Receivables Rs. 40,000; Revenue from Operations, i.e., Net Sales Rs. 6,00,000.
Calculate the Trade Receivables Turnover Ratio.
| Credit Sales | = | X |
| Cash Sales | = | X | x | 25 | = | 25x |
| 100 | 100 |
Total Sales = Cash Sales + Credit Sales
| Rs. 6,00,000 | = | X | x | 25x | + | X |
| 100 |
| Rs. 6,00,000 x 100 | = | 25x X 100 |
| Rs. 6,00,00,000 | = | 125x |
| X | = | Rs. 6,00,00,000 |
| 125 | ||
| Credit Sales | = | Rs. 4,80,000 |
| Closing Trade Receivables | = | Opening Trade Receivables + 40,000 |
| Rs. 1,00,000 | = | Opening Trade Receivables + 40,000 |
| = | Rs. 1,00,000 – Rs.40,000 | |
| Opening Trade Receivables | = | Rs. 60,000 |
| Average Trade Receivable | = | Opening Trade Receivable + Closing Trade Receivable |
| 2 |
| Average Trade Receivable | = | Rs. 1,00,000 + Rs. 60,000 |
| 2 | ||
| = | Rs. 80,000 |
| Inventory Turnover Ratio | = | Credit Sales |
| Average Trade Receivable |
| Inventory Turnover Ratio | = | Rs. 4,80,000 |
| Rs. 80,000 | ||
| = | 6 Times |
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Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
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