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

Definition

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

or

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

when

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