Difference between debtors turnover ratio and creditors turnover ratio
Answers
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Debtors turnover ratio means how well a company is managing its debtors because in normal course of business company cannot sell all its products in cash and it has to give credit to its customers but important thing while giving credit is how early company can recover the money for credit sales done by the company and debtors turnover ratio measures how quickly a company is able to collect cash from its debtors.
While creditors turnover ratio means how well a company is managing its creditors because in normal course of business company does not pay for all its raw material in cash and since company also takes credit from suppliers it has to pay suppliers on time, creditors turnover ratio measures the time taken by the company to pay cash to its creditors.
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