Here, it is known by relating total debtors and pure borrow sale that what part of sale remain in collected in form of debtors.
It is known by calculating average collection period that in what period an organisation recover the amount of borrow sale from debtors. This period should not be more than generally (1+1/3 of that). If average collection period is more than 4/3, than it is consider that there is more kindness in borrow conditions, carelessness and non-efficiency in managing credit collection. If recover period is less than 4/3, management efficiency, activeness and borrow conditions of business are satisfactory. Delay in recovery of credit is a sign of possibilities of debt accounts.
