Debtor’s turnover ratio is also known as the Trade Receivables Ratio. It is an activity ratio that finds out the relationship between sales and average debtors of the company.
It helps in cash planning as cash flow from customers can be computed on the basis of total sales generated by the company. Provision for doubtful debts is not subtracted from trade receivables.
Formula of Debtor Turnover Ratio?
Debtor Turnover Ratio = Sale/Average Debtor
Example of how to calculate Debtor Turnover Ratio
Average Receivable Days
The accounts receivable days shows the average number of days that amount received from debtor. To calculate the average receivable days, divide 365 days by the Debtor turnover ratio
The formula of Average Receivable Days
Average Receivable Days = 365/Debtor Turnover Ratio
Example of How to calculate average receivable days
