The average collection period is computed by dividing
A) net credit sales by average gross accounts receivable.
B) net credit sales by ending gross accounts receivable.
C) the accounts receivable turnover by 365 days.
D) 365 days by the accounts receivable turnover.

Question

Quizplus · Accepted Answer

The average collection period is the number of days it takes for a business to collect its accounts receivable. It can be calculated by dividing 365 days by the accounts receivable turnover (the number of times a business collects its average accounts receivable balance in a year). Therefore, the correct choice is D.

The Average Collection Period Is Computed by Dividing