Turnover ratios: inventory, debtor and creditor
1 min read
Updated 29 Sep 2026
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AI summary
How fast stock sells, customers pay and you pay suppliers.
3 sections
Formulas
| Ratio | Formula | In days |
|---|---|---|
| Inventory turnover | Cost of goods sold ÷ Average inventory | Inventory days = 365 ÷ turnover |
| Debtor (receivables) turnover | Credit sales ÷ Average debtors | Debtor days = 365 ÷ turnover |
| Creditor (payables) turnover | Credit purchases ÷ Average creditors | Creditor days = 365 ÷ turnover |
Average = (opening + closing) ÷ 2.
Example
COGS ₹14 lakh, average stock ₹2 lakh → turnover 7 → 52 days of stock.
Credit sales ₹20 lakh, average debtors ₹3.3 lakh → turnover 6 → 61 days to collect.
Credit purchases ₹14 lakh, average creditors ₹1.6 lakh → turnover 8.75 → 42 days to pay.
What to look for
- Rising debtor days → collections slowing; check the ageing report.
- Rising inventory days → slow-moving or excess stock.
- Creditor days well below debtor days → you are financing your customers.
PreviousLiquidity and solvency ratios: current, quick and debt-equity Next in Financial Statements Profitability ratios: GP and NP margin, ROCE, ROE
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