Conceptually, what does the days' sales in receivables ratio measure for a firm?
A) The number of days it takes to generate dollar sales equal to the outstanding accounts receivable balance.
B) The number of days it takes on average for customers to pay their bills.
C) The number of days it takes for a firm to pay its bills assuming no new payables are created.
D) The number of times during the year a firm collects and relends its receivables.
E) The number of days it takes before the firm's working capital becomes negative.

Question

Quizplus · Accepted Answer

The days' sales in receivables ratio, also known as the average collection period, measures the average number of days it takes for a company to collect payment from its customers after a sale has been made. This is a key indicator of the efficiency of a firm's credit policies and accounts receivable management.

Conceptually, What Does the Days' Sales in Receivables Ratio Measure