The Holiday Corporation had sales of $450 million this year.Its accounts receivable balance averaged $30 million.How long,on average,does it take the firm to collect on its sales?

Question

Quizplus · Accepted Answer

To calculate the average collection period, we need to divide the accounts receivable balance by the average daily sales. 
Average daily sales = (Annual sales / 365) = ($450 million / 365) = $1.2329 million per day 
Average collection period = (Accounts receivable balance / Average daily sales ) = ($30 million / $1.2329 million per day) = 24.3 days. 
Therefore, the answer is B.

The Holiday Corporation Had Sales of $450 Million This Year