Question
What does too high 'Trade Receivables Turnover Ratio' indicate?
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Answer
Normally, a high trade receivables turnover ratio indicates the prompt payments by trade receivables but a too high ratio may be the result of restrictive credit and collection policy of the management which may curtail the sales and hence may adversely affect the profit.
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Particulars
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(i)
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(ii)
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(iii)
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(iv)
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(v)
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(vi)
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Operating Cycle (Months)
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10
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10
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10
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15
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15
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20
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Expected Period when payment is received (Months)
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9
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12
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14
|
14
|
18
|
18
|
Give necessary journal entries:
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