Debtor days

The debtors days ratio measures how quickly cash is being collected from debtors. The longer it takes for a company to collect, the greater the number of days debtors. Debtor days can also be referred to as Debtor collection period.

Definition

$\mbox{Debtor days} = \frac {\mbox{Year end trade debtors}} {\mbox{Sales}} \times {\mbox{Number of days in financial year}}$

or

$\mbox{Debtor days} = \frac {\mbox{Average trade debtors}} {\mbox{Sales}} \times {\mbox{Number of days in financial year}}$

when

$\mbox{Average trade debtors} = \frac {\mbox{Opening trade debtors} + \mbox{Closing trade debtors}} {\mbox{2}}$

See also

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