CA Intermediate · Financial Management and Strategic Management · Management of Receivables
Asha Traders has annual credit sales of ₹36,00,000 (360-day year). Its average collection period is 45 days. Assuming sales accrue evenly, what is the average investment in receivables at sales value?
Average receivables equal daily credit sales multiplied by the collection period. Daily sales are ₹36,00,000 divided by 360, which is ₹10,000, and multiplied by 45 days gives ₹4,50,000 as the average investment in receivables at sales value.
- A₹4,50,000Correct
- B₹8,00,000
- C₹3,60,000
- D₹4,05,000
Explanation
Daily credit sales = 36,00,000/360 = ₹10,000. Receivables = 10,000 × 45 = ₹4,50,000. Check: 36,00,000 × 45/360 = 4,50,000. The ₹8,00,000 option wrongly divides by 45 instead of multiplying (turnover confusion).
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