Question

The number of days' sales in receivables a.is an estimate of the length of time the receivables have been outstanding. b.is not used. c.measures the number of times the receivables turn over each year. d.is Average Receivables / Sales.

Answer 1

Answer:

a.is an estimate of the length of time the receivables have been outstanding.

Explanation:

The average collection period can be calculated as follows: 365 days in a year divided by the accounts receivable turnover ratio.

Days sales uncollected = Average Account receivable/Net sales*365

A short collection period means prompt collection and better management of receivables. A longer collection period may negatively affect the short-term debt paying ability of the business in the eyes of management.