Find the average collection period for a firm that has credit sales of $120,000,000 and accounts receivable of $30,000,000.
A)30 days
B)120 days
C)90 days
D)45 days
E)60 days

Question

Quizplus · Accepted Answer

Average Collection Period = (Accounts Receivable / Credit Sales) x Number of days in the period
Number of days in the period is usually taken as 365
Therefore, Average Collection Period = (30,000,000 / 120,000,000) x 365
= 91.25 ≈ 90 days
So, the answer is choice C) 90 days, which represents the average number of days it takes for the firm to collect its accounts receivable.

Find the Average Collection Period for a Firm That Has