---
title: "Debtors Ratios"
canonical: "https://kb.myframeworks.com.au/space/FRAM/28403428/Debtors%20Ratios"
format: markdown
---
The following table contains Debtor Ratios:

| **Ratio** | **Explanation** |
| --- | --- |
| <span style="color: #000000">**Current Key Working Capital Ratio**</span> | **Current Assets / Current Liabilities**<br>This ratio is an indication of the ability of a business to meet its debts as they fall due. That is, are the current assets sufficient to cover day to day liabilities?   
Typically speaking, a ratio of 1.5:1 is reasonable. |
| <span style="color: #000000">**Quick Ratio**</span> | **(Debtors + Cash at Bank) / Current Liabilities**  
  
This is a better indication of the ability of a business to pay debts as they fall due. If the company has sufficient funds in debtors and cash to meet its creditors  
and bank overdraft, then it should be able to pay debts on time. A ratio of 1:1 is acceptable. |
| <span style="color: #000000">**Creditors Days**</span> | **Average Trade Creditors / Annual Purchases * 365 days**  
  
This ratio gives an indication of whether a prospective customer appears to be settling accounts on time.<br>For example, if the ratio was:  
$60,000 / $400,000 * 365  
= 55 days  
then, on average, it would appear that the customer takes 55 days to pay.<br>It must then be considered whether the customer will adhere to stated terms or whether terms offered reflect an average of 55 days |
| <span style="color: #000000">**Debtor Days**</span> | <span style="color: #000000">**Average Trade Debtors / Annual Sales * 365 days**</span>  
  
<span style="color: #333333">This is an indication of your debtor's credit control and might give indications as to what the </span>debtors expectations are in terms of being paid. |