Question 54 Chapter 4 of +2-B - USHA Publication 12 Class

Question 54 Chapter 4 of +2-B

Trade Payable Turnover Ratio

54. (Trade Payable T/O Ratio & Average Payment Period) Calculate (i) Trade Payable turnover ratio and (ii) average payment period.

	2016 ₹	2017 ₹
Annual credit purchases	6,80,000	7,50,000
Creditors on January 1	80,000	60,000
Creditors on December 31	60,000	90,000

Take 360 days in a year

The solution of Question 54 Chapter 4 of +2-B: –

2016

Trade Payable Turnover ratio	=	Net credit Purchases
Trade Payable Turnover ratio	=	Average Trade Payable

Average Trade Payable	=	Opening trade Payable + Closing Trade Payable
Average Trade Payable	=	2
Net credit Purchases	=	₹ 6,80,000

	=	₹ 80,000 + ₹ 60,000
	=	2

	=	₹ 70,000

Trade Payable Turnover ratio	=	₹ 6,80,000
Trade Payable Turnover ratio	=	₹ 70,000

	=	9.71 times

Average Payment period	=	No. of days in a year
Average Payment period	=	Trade Payable Turnover ratio

	=	360
	=	9.71

	=	37 days

2017

Net credit Purchases	=	₹ 7,50,000

	=	₹ 60,000 + ₹ 90,000
	=	2

	=	₹ 75,000

Trade Payable Turnover ratio	=	₹ 7,50,000
Trade Payable Turnover ratio	=	₹ 75,000

	=	10 times

Average Payment period	=	No. of days in a year
Average Payment period	=	Trade Payable Turnover ratio

	=	360
	=	10

	=	36 days

End of Solution

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