Creditor and Debtor Days- Finance

Question 1

Define creditor days

Answer 1

Creditor days are estimates of thr average time it takes a business to settle its debts with trade suppliers

Question 2

What is the formula for creditor days?

Answer 2

(Trade payables / Cost of Sales) x 365

Question 3

Is a higher or lower figure better for creditor days?

Answer 3

Higher figure is better. Ideally it should be higher than debtor days.

Question 4

What do stakeholders need to be careful of when looking at creditor and debtor days?

Answer 4

Window-dressing, this is the easiest figure to manipulate

Question 5

Define debtor days

Answer 5

Debtor days are estimates of the average time it takes customers, who are allowed credit, to pay a business