in order to reflect the efficiency in debtors management debtor turnover ratio should be
a)increased
b)decreased
c) kept constant
d)none of the above
Answers
Efficiency on debtor' management means that the creditor is ensuring that the debt given is manageable or will not take so long before being repaid, for efficiency the turnover should be decreased so as too ensure that there is some pay back and this will be reducing the amount that is credited to the debtors, increase in the turnover will mean inefficiency.
In order to reflect the efficiency in debtor's management debtor turnover ratio should be a) Increased.
A high magnitude relation implies either that an organization operates on a method of accounting or that its extension of credit and assortment of assets is economical. Whereas a coffee magnitude relation implies the corporate is not creating the timely assortment of credit.
The magnitude relation is meant to gauge the power of an organization to expeditiously issue a credit to its customers and collect funds from them in a timely manner. A high turnover magnitude relation indicates a mix of a conservative credit policy and an aggressive collections department, moreover as a variety of high-quality customers.