PDSnet Glossary

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Introductory Technical Fundamental Economics Opinion Sectors International Regulatory Other Markets

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Definition

Financial ratios which are used to assess the management of a company's working capital. These ratios include the stock turn ratio and the debtors collection period ratio each of which measure the management of a critical area of working capital management. So the stock turn ratio shows how many days on average the company takes to turn over its stock. Stock which is turned over very slowly can result in obsolescence or excessive capital tied up in stock. The debtors collection period shows the average number of days that it takes for a company to collect its debts. Bad debt collection results in a higher bad debt ratio and, again, more working capital tied up in the debtors' book.

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