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These ratios calculated with the help of items of both Profit and Loss and Balance Sheet.
Example
Debtor Turnover Ratio=
Net Sales/Debtors
Example 1
Suppose Company has a Sales of 140 lacs
Sales Return=20 lacs
It has debtors of 30 lacs
What is Debtor Turnover Ratio?
View AnswerNet Sales=140-20 =120lacs
Debtors=30 lacs
Debtor Turnover Ratio=
Net Sales/Debtors
=120/30
=4
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Example 1 Continued
What is Debtor Collection Period in this Case
View AnswerDebtor Collection Period=
360/ Debtor Turnover Ratio =360/4=90
Debtor Collection Period (in months)=
12/ Debtor Turnover Ratio =12/4=3 month
