Financial ratio means

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 October 2011 HI
MEMBER

I WANT TO KNOW ABOUT DEBTORS TURNOVER RATIO?

FOR GOOD POSITION OF COMPANY WHETHER IT SHOULD BE HIGH OR LOW?

WHAT ARE CONSEQUENCES OF HIGH OR LOW RATIO?

PLEASE EXPLAIN

THANKING YOU IN ADVANCE

CA SUMiT PATWARi

CA SUMiT PATWARi (Expert)
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12 October 2011 Debtors turnover ratio = sales / average debtors.

Hence for a good position, a high debtors turnover ratio is ideal. High debtors turnover ratio means the sales is more as compared to amount blocked in debtors.

If the turnover ratio increases, it may indiacte the following :-
1) Increase in sales
2) Improvement in collection and collection period, etc