Debtors turnover ratio
The debtors turnover indicates the numbers of times on the average that debtors that debtors turnover each year. It also indicates the liquidity of the concern as the rate at which debts are collected influence the liquidity of the concern. The debtors turnover ratio is calculated as under.
Credit Sales
Debtor turnover ratio = ————————————-
Average Accounts Receivable
The term accounts receivable include trade debtors and bills receivable.
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