A firm has sales of $1.6 million, and 25 percent of the sales are for cash. The year-end accounts receivable balance is $175,000. What is the average collection period?
A firm has sales of $1.6 million, and 25 percent of the sales are for cash. The year-end accounts receivable balance is $175,000. What is the average collection period?
Chapter3: Evaluation Of Financial Performance
Section: Chapter Questions
Problem 3P
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A firm has sales of $1.6 million, and 25 percent of the sales are for cash. The year-end accounts receivable balance is $175,000.
What is the average collection period?
Expert Solution
Step 1
Average collection period is the time taken by the company to collect the funds from its receivables. In other words, it is the time taken by the customers to pay their dues.
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