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Meaning of debt collection period

 

 

 

Debt collection period

 

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Business glossary

 

Meaning of term debt collection period :

 

The debt collection period is a type of activity ratio. It measures the number of days that it takes a firm on average to collect their debts. Firms often allow a period of credit to their customers, but it is important for their cash flow that they do not take too long to collect their debts. The debt collection period ratio is measured by dividing the level of debtors (shown on the balance sheet) by the sales revenue (from the profit and loss account) and multiplying by 365 to give the average number of days it has taken for the firm to collect their debts.

 

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Debt collection period

 

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