Second Reasoning Is The Correct Response.
A brief collection period on average.
An efficient administration of accounts receivable and a strict credit policy, both of which enable the company to fulfil its immediate responsibilities, are suggested by a short average collection period.
<h3><u>What does it signify if the average collecting period is shorter?</u></h3>
- A business's liquidity is increased by a shorter average collection time (60 days or less), which is often preferred. The receivables turnover ratio, another liquidity indicator, is calculated using the average collection period as well.
<h3><u>What is a company's typical collecting period?</u></h3>
- A company's average collection period of 30 days shows that it typically takes customers who buy goods or services on credit 30 days to pay off outstanding accounts receivable.
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