Accounting – 6.1 Calculation and understanding of accounting ratios | e-Consult
6.1 Calculation and understanding of accounting ratios (1 questions)
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Calculation:
Trade Receivables Turnover (Days) = (Average Credit Receivables / Credit Sales) x 365
First, we need to calculate the average credit receivables. We are not given the opening and closing balances of trade receivables, so we assume the average is the same as the credit sales in this simplified scenario. This is a common assumption in exam questions where the average is not explicitly provided.
Average Credit Receivables = £250,000
Trade Receivables Turnover (Days) = (£250,000 / £250,000) x 365
Trade Receivables Turnover (Days) = 1 x 365
Trade Receivables Turnover (Days) = 365 days
Answer: 365 days