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Basic Question 7 of 8
Which of the following is the formula for computing the average collection period for accounts receivable?
B. Net accounts receivable divided by average daily credit sales
C. Total credit sales divided by 365 days
A. Gross accounts receivable divided by average daily credit sales
B. Net accounts receivable divided by average daily credit sales
C. Total credit sales divided by 365 days
User Contributed Comments 8
| User | Comment |
|---|---|
| kalps | Average collection period = net accounts receivable / average daily credit sales |
| mm04 | Collectin Period = 365 * Avg. Rev./Net Sales -> Avg. Coll. Period = Avg. Rev/Net Sales |
| synner | avg col period = avg. rev/(netsales/365) = 365*avg. rev/netsales netsales/365 = daily net sales |
| mtcfa | Can you also say this is 365/receibvables turnover, where turnover = sales/avg. rec. |
| Shelton | Avg_Rcv_Ds = 365 * Avg_Rcv / Net_A_Sales Avg_Col_Rcv = 365 * Net_AR / Net_A_Sales Diff bt Avg_Rcv & Net_AR? |
| rocyang | average daily credit sales = average daily a/r thus, net a/r / average daily a/c = # of days of an average collection period |
| johntan1979 | Not another vague question :( Revenue or net credit sales is not the same as average daily sales. They can't be switch freely. And how did average a/r become net receivables just like that? Big difference there. Let's just focus on the default formulas: Receivables turnover = Revenue / Avg Receivables DSO or DAR = 365 / Receivables turnover |
| johntan1979 | Another big issue is which net a/r do you use? The one at the beginning of the year or the one at the end? Best to avoid something ambiguous like this. |
Your review questions and global ranking system were so helpful.
Lina
Learning Outcome Statements
calculate and interpret activity, liquidity, solvency, and profitability ratios
describe relationships among ratios and evaluate a company using ratio analysis
CFA® 2024 Level I Curriculum, Volume 3, Module 11.