CA Final · Financial Reporting · Analysis of Financial Statements
Sundaram Textiles Ltd reports for the year: net credit sales Rs 12,00,000; opening trade receivables Rs 1,50,000; closing trade receivables Rs 2,50,000. Taking 360 days in a year and using average receivables, what is the average collection period?
The average collection period is 60 days. Average receivables are Rs 2,00,000, so turnover on Rs 12,00,000 credit sales is 6 times, and 360 divided by 6 gives 60 days.
- A60 days
- B75 daysCorrect
- C90 days
- D120 days
Explanation
Average receivables = (1,50,000 + 2,50,000)/2 = 2,00,000. Receivables turnover = 12,00,000/2,00,000 = 6 times. Collection period = 360/6 = 60 days. Wait: recheck gives 60, so option 0 is correct.
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