Learn Croatian: Dobar dan! Kako ste?

Yes, it literally translates to "Good day." However, in Croatian, it is the standard, most common way to say "Hello" or "Good afternoon" to someone you encounter during the daytime.

Why does the sentence use ste instead of si?

ste is the formal or plural form of "are." You use it as a polite way to address someone you don't know well, someone older, or a group of people. If you were talking to a friend or a child, you would use the informal Kako si?.

Where is the word for "you" in Kako ste?

Croatian often leaves out subject words like vi (formal you) or ti (informal you) because the verb itself tells us who the subject is. The verb ste already means "you are," so adding the word vi isn't necessary.

Can I use Dobar dan at any time of the day?

No, Dobar dan is usually used from late morning until the sun goes down. Early in the morning you would say Dobro jutro (Good morning), and after dark you would switch to Dobra većer (Good evening).