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What is Creditor Turnover Ratio

Chapter 12
Handbook of Research on Strategic Business Infrastructure Development and Contemporary Issues in Finance
This ratio measures the average credit period enjoyed from the creditors and is calculated as under. It is the ratio between credit purchase and average creditors. A high ratio indicates that creditors are not paid in time, while a low credit period gives an idea that business is not taking the full advantages of the credit period allowed by creditors.
Published in Chapter:
Working Capital Management: A Study Based on Cipla Ltd.
Ashoke Mondal (West Bengal State University, India) and Uttam Kumar Dutta (West Bengal State University, India)
Copyright: © 2014 |Pages: 10
DOI: 10.4018/978-1-4666-5154-8.ch012
Abstract
It is expected that proper management of working capital contributes positively to the value of the firm, and liquidity of the firm negatively affects the profitability of the company. The purpose of the chapter is to analyze the composition and changes of the working capital and to find the impact of liquidity and efficiency of working capital management on profitability. For this purpose, this study is conducted on Cipla Ltd. for the period 2001-2009. From the study, it is found that there is a significant negative relationship between liquidity and profitability. It also reveals that managers can create value for the firm by reducing the holding period in inventories and receivable.
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