Financial Ratio Analysis - Debtors' Turnover Ratio: Advanced

Debtors' Turnover Ratio: Advanced

However, this table from the Carphone Warehouse's annual report can help us with our research.

  2001 2000
Debtors falling due within one year: £'000 £'000
Trade debtors 104,827 55,557
Other debtors 27,516 20,419
Prepayments and accrued income 16,857 6,850
Amounts falling due after more than one year:    
Amounts owed by Group undertakings - -
Total Debtors 149,200 82,826

Do what the financial analyst would do: rework the debtors' turnover ratio and find the length of time that TRADE debtors take to pay their accounts ... is it more in line with what we found on the Web site? ... http://www.carphonewarehouse.com/commerce/servlet/gben-store-Mobile

Put the data into the same format as before:

Carphone Warehouse 31 Mar 2001 25 Mar 2000
  £000 £000
Turnover 1,110,678 697,720
TRADE Debtors due within one year 104,827 55,557

TRADE Debtors Turnover Ratio for the Carphone Warehouse
31 March 2002 104,827
1,110,678 ÷ 365
34.45 days
25 March 2001 55,557
82,826 ÷ 365
29.06 days

There now, a bit nearer to what we are expecting aren't they? Why not EXACTLY 30 days, though, since anyone who has credit seems to have to pay at the end of a month ... find out and explain the answer to this question.

See if you can find out what OTHER debtors might be; and say why we have ignored it for the purposes of these new calculations.

The final stage in this part of our analysis: if we had good enough segmental information, we might be able to find even more information that would give us the exact ratio values we were looking for. What we are really trying to do is to match sales with debtors: only when we do that and have credit and cash turnover data, will we have the true value for the debtors' turnover ratio.

Since we don't have precise information, our values for the debtors' turnover ratio are estimates. Nevertheless, we have seen already that we can check some aspects of the results we get by, for example, going to a Carphone Warehouse shop and investigating payment terms.

Here is the Carphone Warehouse's segmental turnover information ... but it's still not enough for us to be able to match turnover with trade debtors.

  Turnover Turnover
Divisional results are analysed as follows £'000 £'000
Distribution 1,079,143 685,838
Telecoms Services 30,481 10,456
Wireless Data Services 1,054 1,426
Total Turnover 1,110,678 697,720

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