The average collection period shows the approximate number of days the average accounts receivable balance is outstanding.

Question

Quizplus · Accepted Answer

The average collection period is a well-known measure to evaluate the effectiveness of credit and collections policy. This ratio is calculated by dividing the total outstanding accounts receivable by the average daily sales. The result is a rough estimation of the number of days it takes to collect the average accounts receivable balance, which is expressed as a number of days (or times). Therefore, option A is correct.

The Average Collection Period Shows the Approximate Number of Days