Question
A company has average account receivables of Rs 120000
and annual credit sales of Rs 600000, Calculate the average collection period (assume number of days in a year to be 360)Solution
Receivable Turnover Ratio = Annual Credit Sales/ Average Receivables = 600000/120000 = 5 Average Collection period = 360/Receivable Turnover Ratio = 360/5 = 72 days
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