Finance Mcqs

Q.  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


ANSWER: See Answer
 
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
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