CS Executive · Corporate Accounting and Financial Management · Financial Statement Analysis
Meera Ltd has annual credit sales of ₹18,25,000. Opening trade receivables were ₹2,00,000 and closing trade receivables ₹3,00,000. Using average receivables and 365 days, the average collection period is:
The average collection period is 50 days. Average receivables are ₹2,50,000, so receivables turnover on credit sales of ₹18,25,000 is 7.3 times, and 365 divided by 7.3 equals 50 days. Using closing receivables would wrongly give 60 days.
- A50 daysCorrect
- B40 days
- C73 days
- D60 days
Explanation
Average receivables = (2,00,000 + 3,00,000)/2 = ₹2,50,000. Turnover = 18,25,000/2,50,000 = 7.3 times. Collection period = 365/7.3 = 50 days. Using closing receivables gives 60 days, which is the wrong base.
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