Calculation of a firm's average collection period is the same as calculating the:
A) accounts receivable cycle
B) inventory cycle
C) accounts payable cycle
D) cash cycle

Question

Quizplus · Accepted Answer

The average collection period measures the average number of days it takes a company to collect payment from its customers. It is calculated by dividing the average accounts receivable balance by the average daily sales. This calculation is the same as calculating the accounts receivable cycle, which measures the length of time it takes for a company to collect its outstanding accounts receivable. The other cycles listed (inventory cycle, accounts payable cycle, and cash cycle) are different calculations related to a company's inventory management, cash flows, and payments to suppliers.

Calculation of a Firm's Average Collection Period Is the Same