Which of the following best describes a collection period ratio?
A) Long-term liability divided by working capital
B) Accounts receivable divided by average daily credit sales
C) Net income divided by average shareholders' equity
D) Net profit divided by net sales

Question

Quizplus · Accepted Answer

The collection period ratio is a measure of how quickly a company is able to collect its accounts receivable. It is calculated by dividing the accounts receivable by average daily credit sales. A lower collection period ratio indicates that a company is able to collect its receivables more quickly, which is generally viewed as a positive sign. The other options listed are not related to the collection period ratio.

Which of the Following Best Describes a Collection Period Ratio