18 August 2008
If you are determining the net working capital of a sick company where there are over due debtors or companies having high number of bad debt and over due debtors, there is a practice of deducting recovery costs from the net recievables. However since this has no significant effect on the net working capital, banks and financial institution normally tend to identify the bad debts and over due debtors and deduct the same from the whole debtors while calculating the net working capital.
In any case Debtors are made of sale price and the cost to this context is not relevant
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