Debtors Turnover Ratio Definition & Formula

Debtors Turnover Ratio:-

This indicates the relationship of debtors with credit sales. Normally, debtors’ turnover rate should remain more or less constant unless there is a change in the credit policy of the company or in the debt collection procedures. It should be calculated as follows:

Net credit sales / Average Debtors, where Average Debtors = (Period opening debtors + period closing debtors) / 2.

Another way to relate debtors with credit sales is to

calculate the debt collection period, i.e. the average number of days, for which credit sales remain outstanding. These should be calculated as:

Average Debtors * 365 days / credit sales


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