(iii) Trade Receivables turnover ratio (Net Credit Revenue from Operations/Trade Receivables) is also higher than the standard ratio. It implies that company is efficient in collecting its debt. (iv) Return on investment (Net Profit/Capital employed) of the company is lower than the standard ratio. t means. that company is not using capital employed effectively Suggestion : ‘The company should try to push its sales so that turnover ratios may improve. Higher sales will yield higher ret profit: It will also improve the return on capital employed. 2. Cash flow from Debtors for the year ended 2013-2014 : Dr. ‘Trade Receivables A/c cr, Partials ‘amount Particulars ‘amount ® @ To Balance 6/4 50,000 By Cash Ae (Bale) 2,54,000 ‘ToCredit Revenue from operations 240,000 | By Discount allowed +4000 By Bad debts 2,000 By Return inwards 000 By Balance fa 24,000 790,000 2,90,000 Cash flow from Debtors for the year ended 2014-2015 Dr ‘Trade Receivables A/c cr. Parieuae mount Paria Amount @ ® Tosalance 6/8 74;000 | By Cash ATE (Bal Fe) 26,00 “oCredit Revenue from operations 480,000 | By Discount alowed 6,000 By Bad debts 4000 By Return inwards 8,000 By Balance cfs 0,000 5908000 508,000 Increase in cash flow during the year = & 4,26,000 ~& 2,54,000 = 1,72,000 3. XYZ Ltd is earning more on its Revenue as compared to POR Ltd. Rate of Return on Investment of XYZ Ltd is more than POR Ltd. This indicates that the overall performance of XYZ Ltd is better than POR Ltd. XYZ Ltd is more successful as itis utilizing its invest ment more efficiently than POR Ltd. 4. Credit Purchases © 36,00,000 Cash Purchases are 25% of total purchases, Let Total Purchases = 2 x Cash Purchases = 25% of x Credit Purchases = x~ 25% of &x Accountancy = 12. (2)