Asked by Taylor Morrison on Jul 16, 2024
Verified
If the average collection period is 35 days, this means:
A) from the date of purchase to the date of payment is 35 days.
B) from the date of sale to the date of receipt of payment is 35 days.
C) from the date of discount to the date of receipt of payment is 35 days.
D) None of these answers are correct.
Average Collection Period
A ratio that shows how quickly moneys owed are received from customers and thereby measures how effectively a company collects its accounts receivables.
Date of Sale
The specific day on which a transaction is completed and ownership of goods or assets is transferred.
Date of Payment
The specific day on which a payment is due or processed.
- Understand the significance of asset turnover ratios and how they reflect on a company's efficiency.
Verified Answer
VK
Vanika kapoorJul 20, 2024
Final Answer :
B
Explanation :
The average collection period refers to the average number of days between the date a company makes a sale on credit and the date it receives payment for that sale. Therefore, option B is correct as it accurately describes this period from the date of sale to the date of receipt of payment.
Learning Objectives
- Understand the significance of asset turnover ratios and how they reflect on a company's efficiency.