80% of sales of Rs. 10,00,000 of a firm are on credit. It has a receivable turnover of 8. What is the average collection period (360 days a year) and average debtors of the firm?

The correct answer is C. 45 days and Rs. 8,00,000.

Receivable turnover is a measure of how quickly a company collects its receivables. It is calculated by dividing net credit sales by average accounts receivable. In this case, the receivable turnover is 8, which means that the company collects its receivables on average every 90 days (360 / 8 = 45).

We know that 80% of the company’s sales are on credit, so the company’s net credit sales are 0.8 * 10,00,000 = 8,00,000. We also know that the company’s average accounts receivable are 8,00,000. Therefore, the average collection period is 45 days.

Here is a brief explanation of each option:

• Option A is incorrect because the average collection period is 45 days, not 360 days.
• Option B is incorrect because the average receivables are 8,00,000, not 1,00,000.
• Option C is correct because the average collection period is 45 days and the average receivables are 8,00,000.
• Option D is incorrect because the average collection period is 45 days, not 360 days.