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

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

or

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

when

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

References