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The following extract of income statement is given
Operating profit :42000
Interest charges :(16000)
Pbt. :26000
Taxation. :5460
20540
Pind co has an operating profit margin of 15%,non current liabilities payable 50000 current ratio 1.5 and quick ratio of 0.9 pind co has a receivable to cash ratio of 2:2.5 what is the receivable days ?
Ans
Payable is 50000 there fore , cash +receivable=45000 as receivable:cash ratio I’d 2:2.5, so receivable is 20000 and receivable days are 20000÷(40000÷0.15 ) ×365 =26 could you please explain the logic behind 40000÷0.15
Thank youYou have either copied the question wrongly, or you have not typed out the whole of the question. For example, you write that non-current liabilities are 50,000, but payables are not a non-current liability!
However, I can explain the last part.
Since the operating profit is 15% of the sales, the sales must be 42,000 / 15% = 280,000.Therefore the receivables days are (20,000 / 280,000) x 365 = 26 days
(but again, either you have mistyped that bit of the answer or there is a typing mistake in the printed answer).
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