Class Notes (836,580)
Canada (509,856)
Accounting (91)
ACCT 301 (31)
All (31)

chapter 23.docx

2 Pages
Unlock Document

ACCT 301
All Professors

Chapter 23 Stock Turnover Period = Avg. Stock Level X 365 Cost of Goods Sold 1. Measures the speed with which a company turns over its stock 2. Multiplying the ratio by 365 represents this ratio in terms of days that elapse between the date that goods are delivered by suppliers and dispatched to customers. I.e. the stock holding period. 3. Companies must strive to keep the stock holding period as low as possible in order to minimize associated costs. 4. A reduction in the average period for which stocks are held, suggests that the purchasing, distribution, and selling functions have been streamlined 5. Higher sales and market activity, usually increases the stock figure to ensure that additional consumer requirements can be met without delay. 6. An increase in sales without a similar increase in stock means that resource which would otherwise be tied up in stock, is available for use elsewhere in the business. Rate of Collection of Debtors (Debtor’s Payment Period) Avg. Trade Debtors X 365 Credit Sales 1. The higher the figure, the more it is assumed that money tied up in debts are resources that are yielding no return and also losing value during a period of inflation. 2. Therefore the reasons for the change should be carefully investigated, to find out whether a) There was an increase in the credit period to generate more sales b) There is slackness in the credit-control department. 3. Please note that the sales figure in the P&L is exclusive of VAT but the debtor’s figure is
More Less

Related notes for ACCT 301

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.