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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
debtor turnover ratio = Net Credit Sales / Average Debtors ( sundry debtors + bill
receivables)
The table shows that the ratio showing a increasing trend in the year 2015-2016 the ratio was
1.79 least in the year 2014-2015 (1.33. The debt amount has increase from 2015-2016 to
2014-2015, but in 2012-2013 it has reduced & again it has increased in 2013-2014. The
debtor rations value increase from2014-2015 to 2015-2016. The amount was less than debt in
the first two years, but in the remaining years the equity value has increased. When compared
to the debt component. This shows that the company is depending more on the funds & less
on borrowed funds.
CREDITORS TURNOVER RATIO
It is a ratio of net credit purchases to average trade creditors. Creditors turnover ratio is also
known as payables turnover ratio.
It is on the pattern of debtors turnover ratio. It indicates the speed with which the payments
are made to the trade creditors. It establishes relationship between net credit annual purchases
and average accounts payables. Accounts payables include trade creditors and bills payables.
Average means opening plus closing balance divided by two. In this case also accounts
payables' figure should be considered at gross value i.e. before deducting provision for
discount on creditors (if any).
The table shows that the ratio showing a increasing trend in the year 2015-2016 the ratio was
1.79 least in the year 2014-2015 (1.33. The debt amount has increase from 2015-2016 to
2014-2015, but in 2012-2013 it has reduced & again it has increased in 2013-2014. The
debtor rations value increase from2014-2015 to 2015-2016. The amount was less than debt in
the first two years, but in the remaining years the equity value has increased. When compared
to the debt component. This shows that the company is depending more on the funds & less
on borrowed funds.