Please help me! Urgent :( Receivables

[Corian92]

Hello,

I am really struggling to understand whether bad debts should be included or not when calculating my receivable days ratio?

The receivable days ratio is : receivables/total credit sales * 365

If my total credit sales are 1000 but I know that 100 are bad debts should I put 900 or 1000 in the denominator?


Thank you sooo much!

 

[bklynboy]

I would include. The point of the ratio is to understand how long it takes to collect a receivable. Bad debts will never be collected and would distort your analysis. This is how I have seen it done.

 

[Counterofbeans]

We include it