CA Intermediate · Financial Management and Strategic Management · Management of Receivables
A firm has credit sales of ₹9,00,000 for the year (360 days) and receivables outstanding at year end of ₹1,50,000. What is its debtors turnover ratio and average collection period, assuming year-end receivables equal the average?
Debtors turnover is 6 times and the average collection period is 60 days. Credit sales of ₹9,00,000 divided by receivables of ₹1,50,000 gives 6, and dividing 360 days by 6 gives 60 days.
- A6 times; 60 daysCorrect
- B6 times; 30 days
- C9 times; 40 days
- D5 times; 72 days
Explanation
Debtors turnover = 9,00,000 / 1,50,000 = 6 times. Average collection period = 360 / 6 = 60 days. The 30-day option wrongly uses a 180-day base.
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