What are sundry debtors?
In simple terms, debtors are persons who owe money to the company. Typically, such debts are on goods and services that are sold on credit. Sundry debtors can also be termed as ‘accounts receivable’. The reason sundry debtors are recorded as assets to a company is because the money belongs to the company, which it expects to receive within a short period. From an investor’s perspective, it would help to analyse the speed at which a company is able to collect the money from its debtors. If a company’s collection period is long or is expanding, it is not a good sign. Apart from meeting daily expenses, a company would also prefer having low debtor days (mentioned below) to avoid the risk of defaults. Similar to inventory days, there is a ratio which helps in analysing the number of days it takes a company to collect payments from its debtors. This ratio is termed as ‘debtor days’. The formula for the same is: Debtor days = Debtors/Sales * 365 Let us take up an example to understand this f
