CUET UG 2024 — Accountancy Financial Statements

Trade Receivables Turnover Ratio

The Trade Receivables Turnover Ratio is calculated as:

$$\text{Trade Receivables Turnover Ratio} = \frac{\text{Revenue from Operations}}{\text{Average Trade Receivables}} = \frac{8,75,000}{1,07,000} = 8.18 \text{ times}$$Trade Receivables Turnover Ratio=Average Trade ReceivablesRevenue from Operations​=1,07,0008,75,000​=8.18 times

Note: Since opening balances of debtors and bills receivables are not available, the year-end figures are used as average trade receivables.

$$\text{Average Trade Receivables} = \text{Bills Receivable} + \text{Trade Debtors} = 48,000 + 59,000 = 1,07,000$$Average Trade Receivables=Bills Receivable+Trade Debtors=48,000+59,000=1,07,000

This ratio reflects how efficiently a firm collects cash from its trade receivables. It is expressed in times, indicating how often receivables are converted into cash during the accounting period, and not as a percentage.