This measures the number of days accounts receivable are held before the firm collects cash from the sale.
A) Accounts receivable turnover
B) Average collection period
C) Average payment period
D) Accounts payable turnover

Question

Quizplus · Accepted Answer

The average collection period measures the number of days it takes for a firm to collect cash from the sale of its products or services. This is calculated by dividing the average accounts receivable by the average daily sales. A shorter collection period is better as it indicates the firm is collecting cash faster and can reinvest that cash in the business.

This Measures the Number of Days Accounts Receivable Are Held