Below are some selected figures from the financial statements of Gest Ltd for the year ending 30 June 2006.
Year Ending 30 June 2006 £'000
Revenue 24,350
Cost of sales 16,770
Debtors 2,002
Creditors 1,540
Stock 1,120
Current Assets 4,530
Current Liabilities 3,975
What is the creditor payment period (creditor days)?
Could you please explain how to get the values for the formulae.
Thanks
2007-12-10 00:33:26 · 6 answers · asked by jammey h 2 in Business & Finance ➔ Other - Business & Finance
Creditors are people you owe money to.
Generally, this is because you purchased materials from them (i.e. they are your suppliers) in order to make your products.
Ideally you need to know last years Creditors and Stock levels = however these are not given, so you will have to assume the situation has not changed dramatically.
We are also assuming that Cost of Sales is MAINLY the cost of materials (it's often surprising what a business books to CoS :-) )
This gives you 1540/16770 * 365 = 33.5 days.
Interestingly your Debtor days are 2002/24350 * 365 = 30 days.
This suggests the business is collecting money from it's customers faster than it is paying it's suppliers (a good situation to be in).
2007-12-13 18:43:52 · answer #1 · answered by Steve B 7 · 0⤊ 0⤋
Creditor Payment Period
2016-11-07 05:47:55 · answer #2 · answered by ritzer 4 · 0⤊ 0⤋
To get the creditor days divide the year end creditors by the cost of sales figure then divide by 365.
In this case 1540/16770*365 = 33.5 days.
This is, as with most ratios of this type, extremely subjective as it will change dramatically in businesses that do not have a even production / sales cycle through the year.
However it is useful to compare year on year to see trends.
2007-12-10 00:50:01 · answer #3 · answered by Gary 2 · 3⤊ 0⤋
Debtor Collection Period Definition
2016-12-31 04:55:41 · answer #4 · answered by garverick 4 · 0⤊ 0⤋
Are you talking about your accounts receivables (from your customers) being aged longer than the norm? You may have to look at your billing and collection procedures and maybe even your customer's credit profiles and they demographics of your customers. It could be bad, an early sign that your customer's don't really have the money to be doing business with you. You need a better customer base.
2016-03-14 06:42:42 · answer #5 · answered by Anonymous · 0⤊ 0⤋
1
2017-03-05 05:28:39 · answer #6 · answered by ? 3 · 0⤊ 0⤋