__Formula of Debtors Turnover Ratio:__

Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors

The
two basic components of accounts receivable turnover ratio are net
credit annual sales and average trade debtors. The trade debtors for the
purpose of this ratio include the amount of Trade Debtors & Bills
Receivables. The average receivables are found by adding the opening
receivables and closing balance of receivables and dividing the total by
two. It should be noted that provision for bad and doubtful debts
should not be deducted since this may give an impression that some
amount of receivables has been collected. But when the information about
opening and closing balances of trade debtors and credit sales is not
available, then the debtors turnover ratio can be calculated by dividing
the total sales by the balance of debtors (inclusive of bills
receivables) given. and formula can be written as follows.

Debtors Turnover Ratio = Total Sales / Debtors

**Average debtor balance **
*average debtors balance* (between 2 years) = *Debtors balance / 2*