Skip to content

CS Executive · Corporate Accounting and Financial Management · Working Capital Management

Kapoor Industries has annual credit sales of Rs 24,00,000 and the receivables turnover ratio is 8 times. Assuming a 360-day year, what is the average collection period?

The average collection period is 360 days divided by the receivables turnover of 8 times, giving 45 days. This can be checked by noting average receivables of Rs 3,00,000 equal 45 days of daily credit sales of about Rs 6,667.

  1. A30 days
  2. B60 days
  3. C45 daysCorrect
  4. D40 days

Explanation

Average collection period = 360 / receivables turnover = 360/8 = 45 days. Check: receivables = 24,00,000/8 = Rs 3,00,000, which is 45 days of daily sales Rs 6,667. 30 days would imply turnover of 12 times.

Did you get it right without looking?

One question tells you little. A timed set on Working Capital Management shows your real accuracy, how long you take and where you lose marks.

Practise Working Capital ManagementFree diagnostic mock

More Working Capital Management questions