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

[math]\displaystyle{ \mbox{Debtor days} = \frac {\mbox{Year end trade debtors}} {\mbox{Sales}} \times {\mbox{Number of days in financial year}} }[/math]

[math]\displaystyle{ \mbox{Debtor days} = \frac {\mbox{Average trade debtors}} {\mbox{Sales}} \times {\mbox{Number of days in financial year}} }[/math]

when

[math]\displaystyle{ \mbox{Average trade debtors} = \frac {\mbox{Opening trade debtors} + \mbox{Closing trade debtors}} {\mbox{2}} }[/math]

## References

1. ↑ Financial Management: Management Extra. Elsevier. 2005. pp. 92. ISBN 0-7506-6687-0.

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