Question

Efficiency in debtor management,what will debtor turnover ratio?Decrease?

Answer 1

Debtors turnover ratio, also called accounts receivable turnover ratio, is a ratio that is used to gauge the number of times a business is able to convert its credit sales to cash during a financial year.  Collection period is the time taken by the company to convert its credit sales to cash. Both these ratios indicate the efficiency factor of the company in collecting receivables from its debtors and the speed at which they are able to do it. These two ratios are largely used to indicate the liquidity position of the company along with its efficiency with which operates. It also reflects the power the company has to dictate credit terms.