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.
Debtor days
=
Year end trade debtors
Sales
×
Number of days in financial year
{\displaystyle {\mbox{Debtor days}}={\frac {\mbox{Year end trade debtors}}{\mbox{Sales}}}\times {\mbox{Number of days in financial year}}}
or
Debtor days
=
Average trade debtors
Sales
×
Number of days in financial year
{\displaystyle {\mbox{Debtor days}}={\frac {\mbox{Average trade debtors}}{\mbox{Sales}}}\times {\mbox{Number of days in financial year}}}
when
Average trade debtors
=
Opening trade debtors
+
Closing trade debtors
2
{\displaystyle {\mbox{Average trade debtors}}={\frac {{\mbox{Opening trade debtors}}+{\mbox{Closing trade debtors}}}{\mbox{2}}}}
