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Class 12 Tuition > Learn Commerce > The Debaters turnover Ratio of a company is 6 times....
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The Debaters turnover Ratio of a company is 6 times. State with reasons whether the ratio will improve, decrease or not change due to increases in the value of closing stock by Rs. 50,000?

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Debtors Turnover Ratio: Net credit Sales/Average Debtors. Since there is no use of closing stock in the debtors turnover ratio. Therefore increase in value of closing stock will not affect the debtors turnover ratio.
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There will be no change in the Debtor turnover ratio due to Increse or decrease in the valur of closing stock. Because it doesn't effect to the Debtor turnover ratio. The formula is: Debtor Turnuover Ratio = Total Credit Sales. Average Debtors
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There will be no change in the Debtor turnover ratio due to Increse or decrease in the valur of closing stock. Because it doesn't effect to the Debtor turnover ratio. The formula is:

Debtor Turnuover Ratio = Total Credit Sales.

   Average Debtors

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The purpose of this ratio is to mesaure the liqudity of the receivables The ratio explians the relationship of the net credit sales of the firm.The rate at cash generated by turn over of debtors Debtors turn over ratio=Net credit sales /Avg. debtors Where as Avg debtors = Opening...
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The purpose of this ratio is to mesaure the liqudity of the receivables 

     The ratio explians the relationship of the net credit sales of the firm.The rate at  cash generated by turn over of debtors  

 Debtors turn over ratio=Net credit sales /Avg.            debtors 

      Where as Avg debtors =

Opening balnce +closing balnce /2

       Debtors turnover can not difffer by incrementbif closing stock .

 

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