Activity 16 - Vodafone Debtors' Turnover Ratio
Let's repeat these calculations but for Vodafone. Go to the database, find the information you need and calculate the debtors' turnover ratios for them.
Did you get this?
Vodafone is consistent... consistently terrible when compared with the Carphone Warehouse. Can it really be true that a mobile telecommunications business waits three months for its debtors to pay their accounts? After all, the demand for mobile phones is such that Vodafone can insist on its payment terms can't they?
Here's some additional information taken from Vodafone's annual report that will help us to sort this mess out!
| 2002 | 2001 | |
|---|---|---|
| Debtors due within one year: | £m | £m |
| Trade debtors | 3,389 | 1,852 |
| ... | ... | ... |
| Total Debtors | 6,095 | 3,701 |
Do what the financial analyst did for the Carphone Warehouse and rework the debtors' turnover ratio and find the length of time that trade debtors take to pay their accounts ... is it more sensible and realistic than three months?
Put the data into the same format as before:
| Vodafone | 31 Mar 2002 | 31 Mar 2001 |
|---|---|---|
| £m | £m | |
| Turnover | 22,845 | 15,004 |
| TRADE Debtors due within one year | 3,389 | 1,852 |
| Debtors Turnover Ratio for Vodafone | ||
| 31 March 2002 |
3,389
22,845 ÷ 365 |
54.15 days |
| 31 March 2001 |
1,852
15,004 ÷ 365 |
45.05 days |
A lot better and much nearer to what we should expect and ... still a lot longer than the Carphone Warehouse. Try to find out what is it about Vodafone that makes their Trade debtors payment terms so generous when compared with the Carphone Warehouse.
Remember that we talked about the liquidity of debtors when we discussed the acid test ratio. Now we can see that the Carphone Warehouse's debtors are not that liquid.
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