Average Collection Period equals:
ACredit Sales / Receivables
BReceivables / Total Sales
C12 months ÷ Receivables Turnover Ratio
DCash sales / Average debtors
Answer & Solution
Correct answer: C. 12 months ÷ Receivables Turnover Ratio
1. Receivables Turnover = Credit Sales / Average Accounts Receivable.
2. Average Collection Period = 12 months (or 360 days) / Receivables Turnover Ratio.
3. Indicates how quickly debtors pay.
_Source: ICAI BoS CA Inter Paper 6A, Ch 3 "Financial Analysis and Planning — Ratio Analysis", §3.3(ii)_
Related questions
Total Assets ₹50 lakh; Sales ₹2 crore. Total Assets Turnover Ratio is:A high Fixed Assets Turnover Ratio could indicate:Working Capital Turnover Ratio is:Credit Sales ₹36,00,000; Average Receivables ₹6,00,000. Receivables Turnover Ratio is:COGS ₹12,00,000; Opening inventory ₹1,50,000; Closing inventory ₹2,50,000. Inventory TurnoInventory Turnover Ratio is: