Debtor Turnover Ratio

Meaning Debtor Turnover ratio

Debtor turnover ratio is the relationship between net sales and average debtors. It is also called account receivable turnover ratio because we debtor and bill receivables' total is used for following formula

= Net Credit Sales / Average Debtors ( sundry debtors + bill receivables)

Average Debtors = Opening balance of debtors + closing balance of debtors / 2

Net Credit Sales = Total sales - sales return - cash sales

If net credit sales is $50000 and average debtors are $ 10000, then debtor turnover ratio is 5 times. It means, net sales is 5 times of total debtors. We issue new stock for sale which is 5 times of its debtors. It means, our average debtors 5 times are converted into cash. We collected cash from our debtors and then we sell the more goods.

Interpretation of Debtor Turnover Ratio

1. Higher debtor turnover ratio is good because more higher debtor turnover ratio means, more fastly, we are collecting money. Suppose, in above example, we have only one debtor Mr. Alfred. We sold $ 50000 goods 5 times. It means, we are collecting money from Alfred 5 times. More times, we collect money from Mr. Alfred, our liquidity position will become more strong.

2. Lower debtor turnover ratio is not good because it tells us that we have not manage debtors better ways. Money from debtors are not collected fastly.

If we calculate average collection period on the basis of debtor turnover ratio, we can analyze our debtors more deeply.

Related : Working Capital Turnover Ratio



access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
Accounting Education: Debtor Turnover Ratio
Debtor Turnover Ratio
Accounting Education
Not found any posts VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES POSTS View All RECOMMENDED FOR YOU LABEL ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock