Standard Company had net sales of Rs. 750,000 over the past year. During that time, average receivables were Rs. 150,000. Assuming a 365-day year, what was the average collection period?
A. 5 days
B. 36 days
C. 48 days
D. 73 days
The average collection period is calculated by dividing the average balance of accounts receivable by total net credit sales for the period and multiplying the quotient by the number of days in the period.
use the following formula:
(Average Receivables/Net Sales)*365
150,000/750,000*365 = 73 days
_________________________________________________
Net sales=750,000
A/C receivables= 150,000
days in a year =365
Collection period= (A/C Receivables/ net sales)*days in a year
= (150,000/750,000)*365= 73 days