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Saturday, April 30, 2011

Debtors Turnover Ratio Examples

Definition: Debtors turnover ratio (or Accounts receivable turnover ratio) indicates how long, on average, people take to pay a firm for their purchases. Generally the higher the ratio, the more efficient is the management of debtors.

Formula:
Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors
Or,
Debtors Turnover Ratio = Total Sales / Debtors

Example 1:
XYZ Ltd has the following

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