Financial Management

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This discussion clarifies the calculation of investment in debtors within working capital management. While the general formula uses cost of sales, some examples use the sales value. This is typically because cash sales figures were provided, allowing for adjustments to profit and depreciation to arrive at the investment in debtors.

subash

subash (Querist)

16 February 2020 Working capital Management - Receivables management - calculation of Investment in Debtors formula = cost of sales * credit period / 12 but in few sum calculation - investment in debtors instead of cost of sales. they take sales value. i don't know why ? any one answer me please

CA PARTH SHAH

CA PARTH SHAH (Expert)

16 February 2020 In the sums in which they have taken value of debtors instead of cost of sales, value of cash sales must have provided to you. So they deduct profits and depreciation form debtors to calculate investment in debtors.

You may send the sum in which you have query on caparth@parthdshah.com. I will be able to explain you better.

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subash

subash (Querist)

18 February 2020 Sir, Thank you for your reply

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