The average collection period reveals
A)How many days,on average,it takes between when an order is placed until the cash is collected.
B)How many days,on average,the company takes to collect cash from a credit sale.
C)How many days,on average,the company takes to collect past due accounts.
D)How many days,on average,it takes between when an original contact is made to collect an account until the cash is collected.

Question

Quizplus · Accepted Answer

The average collection period represents the average number of days that a company takes to collect payments from its credit sales. It is calculated by dividing the total outstanding receivables by the average daily sales. Option A is incorrect because it includes the time between order placement and cash collection, which is not necessarily the same as credit sales. Option C is incorrect because it only refers to past due accounts, not all credit sales. Option D is too broad and not specific to credit sales.

The Average Collection Period Reveals