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Creditors' Turnover: Advanced 1

The Carphone Warehouse has a supplier payment policy, as stated in its annual report:

Supplier payment policy
The Group's policy is to agree terms of transactions, including payment terms, with suppliers and, provided suppliers perform in accordance with the agreed terms, it is the Group's normal practice that payment is made accordingly. The number of days outstanding between receipt of invoices and date of payment calculated by reference to the amount owed to trade creditors at the period end as a proportion of the amounts invoiced by suppliers during the period, was 53 days (2000 - 45 days).

Source: Carphone Warehouse Annual Report - page 22 [PDF]

This supplier payment policy tells us that the creditors' turnover ratio was 53 days in 2001 and 45 days in 2000. Can we prove that this is true from the information we have? Well, a note to the accounts in the annual report also shows us the breakdown of the creditors' values

Let's rework the creditors' turnover ratio now on the basis of trade creditors and see what we find, fill in the blanks:

These figures are clearly a lot less than our original estimates of the creditors' turnover figures but still not in agreement with the figures that the Carphone Warehouse have given us. Who is right, us or the Carphone Warehouse? Seriously, our figures are arithmetically correct but we are missing something ... what is it that we are missing?

We are missing enough detailed information to allow us to agree with the 53 and 45 days we have been given. What we have is the end of year creditors' balances: what the Carphone Warehouse has is the exact amounts invoiced by suppliers during the period ... we only have the cost of sales information and that's not the same, is it?

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