Debtor Collection Period = (Average Debtors / Credit Sales) x 365 ( = No. of days) (average debtors = debtors at the beginning of the year + debtors at the end of the year, divided by 2)
Credit Sales are all sales made on credit (i.e. excluding cash sales) A long debtors collection period is an indication of slow or late payments by debtors.
The multiplier may be changed to 12 (for months) or 52 (for weeks) if appropriate.
Famous quotes containing the words debtor, collection and/or period:
“Every novel is a debtor to Homer.”
—Ralph Waldo Emerson (1803–1882)
“The Nature of Familiar Letters, written, as it were, to the Moment, while the Heart is agitated by Hopes and Fears, on Events undecided, must plead an Excuse for the Bulk of a Collection of this Kind. Mere Facts and Characters might be comprised in a much smaller Compass: But, would they be equally interesting?”
—Samuel Richardson (1689–1761)
“There is not any present moment that is unconnected with some future one. The life of every man is a continued chain of incidents, each link of which hangs upon the former. The transition from cause to effect, from event to event, is often carried on by secret steps, which our foresight cannot divine, and our sagacity is unable to trace. Evil may at some future period bring forth good; and good may bring forth evil, both equally unexpected.”
—Joseph Addison (1672–1719)