Debtor and creditor days

Investors looking for an indication of a firm's commercial power may look at how fast it pays customers and suppliers.

Investors looking for an indication of a firm's commercial power may look at how fast it pays customers and suppliers.

Enter debtor and creditor days. Say a firm has sales of £500m, opening balance-sheet debtors (receivables) of £50m and closing debtors of £60m. The average is £55m. Expressed in days, that's (£55m/£500m) x 365, or about 40 days. So on average customers pay up after 40 days.

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