Average collection period

Average collection period - by dividing 365 by the...

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Average collection period.  The  average collection period  (also known as  day's sales  outstanding ) is a variation of receivables turnover. It calculates the number of days it will take to  collect the average receivables balance. It is often used to evaluate the effectiveness of a company's  credit and collection policies. A rule of thumb is the average collection period should not be  significantly greater than a company's credit term period. The average collection period is calculated 
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Unformatted text preview: by dividing 365 by the receivables turnover ratio. 20X1 20X0 Receivables Turnover 6.8 times 5.3 times Average Collection Period 53.7 days 68.9 days The decrease in the average collection period is favorable. If the credit period is 60 days, the 20X1 average is very good. However, if the credit period is 30 days, the company needs to review its collection efforts....
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This note was uploaded on 11/15/2011 for the course ACCT 2310 taught by Professor Staff during the Spring '09 term at Texas State.

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Average collection period - by dividing 365 by the...

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