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    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)
    A 75 days Correct Answer Incorrect Answer
    B 74 days Correct Answer Incorrect Answer
    C 72 days Correct Answer Incorrect Answer
    D 70 days Correct Answer Incorrect Answer
    E 60 days Correct Answer Incorrect Answer

    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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