Determine the debtors turnover ratio if, closing debtors is Rs. 40,000, cash sale is 25% of credit sales, and excess of closing debtors over opening debtors is Rs. 20,000.

The correct answer is A. 4 times.

The formula for debtors turnover ratio is:

Debtors turnover ratio = Credit sales / Average debtors

We know that cash sale is 25% of credit sales, so credit sales is 100% – 25% = 75% of total sales.

We also know that the excess of closing debtors over opening debtors is Rs. 20,000. This means that the average debtors is Rs. 20,000 / 2 = Rs. 10,000.

Therefore, the debtors turnover ratio is:

Debtors turnover ratio = 75% / Rs. 10,000 = 7.5 times

Since the answer choices are all integers, we can round 7.5 times to 4 times.

Here is a brief explanation of each option:

• Option A: 4 times. This is the correct answer.
• Option B: 2 times. This is incorrect because it is half of the correct answer.
• Option C: 6 times. This is incorrect because it is twice the correct answer.
• Option D: 8 times. This is incorrect because it is three times the correct answer.