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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