Calculator
Debtor Days – Year End Method
Debtor Days – Average Method
Definition – What is Debtor Days?
Debtor Days measures how quickly cash is collected from debtors owing the firm money.
Formula – How to calculate Debtor Days
Debtor Days (Year End Method) = (Year End Debtors / Sales) x 365
Debtor Days (Average Method) = (((Year Start Debtors + Year End Debtors) / 2) / Sales) x 365
Example
Year End Method – A company has year end debtors of $3,500 and annual sales of $12,000.
Debtor Days (Year End Method) = ($3,500 / $12,000) x 365 = 0.29167 x 365 = 106.46
Average Method – A company has year start debtors of $3,000, year end debtors of $3,500, and annual sales of $12,000.
Debtor Days (Average Method) = ((($3,000 + $3,500) / 2) / $12,000) x 365 = (($6,500 / 2) / $12,000) x 365 = ($3,250 / $12,000) x 365 = 0.27083 x 365 = 98.85
Sources and more resources
- Wikipedia – Debtor Days – A sample of formulas to calculate debtor days.
- Accounting Tools – The debtor days calculation – An explanation of how the debtor days formula works.