CA Intermediate · Financial Management and Strategic Management · Management of Receivables
Sharma Traders sells goods on credit terms of net 45 days. Annual credit sales are ₹7,20,00,000 and the year is taken as 360 days. If all customers pay exactly on the due date, what is the average investment in receivables (at sales value)?
Average receivables equal annual credit sales times the collection period divided by 360. Here, 7,20,00,000 multiplied by 45 and divided by 360 gives ₹90,00,000, since customers pay exactly on day 45 and daily sales are ₹2,00,000.
- A₹90,00,000Correct
- B₹1,80,00,000
- C₹60,00,000
- D₹9,00,00,000
Explanation
Average receivables = credit sales x collection period / 360 = 7,20,00,000 x 45/360 = ₹90,00,000. Option 2 wrongly uses 90 days. Option 3 uses 30 days. Option 4 mistakenly multiplies by 45/36.
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