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 debtors days.[1] Debtor days can also be referred to as Debtor collection period. Another common ratio is the creditors days ratio.

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

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

References

Financial Management: Management Extra. Elsevier. 2005. p. 92. ISBN 0-7506-6687-0.

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[1] Financial Management: Management Extra. Elsevier. 2005. p. 92. ISBN 0-7506-6687-0.