What is a general rule to use in assessing the average collection period?
A)It should not exceed 30 days.
B)It should not exceed the credit term period.
C)It should not exceed the inventory turnover period.
D)It can be any length as long as the customer continues to make monthly payments.

Question

Quizplus · Accepted Answer

The average collection period is the average number of days it takes for a company to collect payments for its accounts receivable. It is a measure of how efficiently a company collects its outstanding debts. Ideally, the average collection period should not exceed the credit term period, which is the maximum time allowed for customers to pay their debts. If the average collection period is longer than the credit term period, it may indicate that the company is having difficulties collecting its debts, which could lead to cash flow problems. Therefore, option B is the best choice.

What Is a General Rule to Use in Assessing the Average