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.{{cite book

|title=Financial Management: Management Extra

|pages=92

|year=2005

|publisher=Elsevier

|isbn=0-7506-6687-0 }}

Debtor days can also be referred to as debtor collection period. Another common ratio is the creditors days ratio.

Definition

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

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

when

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

References

Category:Financial ratios