Debtors' Velocity

Hi,

 Debtors Velocity(a.k.a Debtors days) is

365/Debtors turnover ratio

where debtors turnover ratio=Total Credit Sales/Average recievables

It shows the speed with which collections are made from debtors in other words the days of creditt allowed to debtors to make payment.

Credit sales should be taken and in absence of information relating to Credit and cash sales the total sales mentioned in a problem can be taken as the numerator.

Avg recievables=(op debtors and BR+cl debtors and BR)/2

Some text books assume the no. of days in a year as 360 instaed of 365 and take formula as: 360/Debtors turnover ratio