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)
“We’ll never know the worth of water till the well go dry.”
—18th-century Scottish proverb, collected in James Kelly, Complete Collection of Scottish Proverbs, no. 351 (1721)
“Talent is nothing but a prolonged period of attention and a shortened period of mental assimilation.”
—Konstantin Stanislavsky (1863–1938)