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)
“What is all wisdom save a collection of platitudes? Take fifty of our current proverbial sayings—they are so trite, so threadbare, that we can hardly bring our lips to utter them. None the less they embody the concentrated experience of the race and the man who orders his life according to their teaching cannot go far wrong.”
—Norman Douglas (1868–1952)
“The post-office had a great charm at one period of our lives. When you have lived to my age, you will begin to think letters are never worth going through the rain for.”
—Jane Austen (1775–1817)