Question

Chik’s Chickens has accounts receivable of $7,183. Sales for the year were $10,700. What is its average collection period? (Use 365 days in a year. Do not round intermediate calculations. Round your final answer to the nearest whole number.)

Answer 1

Answer:

The answer is 245 days

Explanation:

The average collection period is the average number of days a business use to collect its accounts receivable. The number of days a business used to collect its business affects its liquidity as fewer days to collect these receivables are good for the business.

The formula is:

(Accounts receivables/Sales) x 365 days.

Accounts receivable - $7,183.

Sales ----------------------- $10,700.

Therefore, we have

($7,183/$10,700) x 365 days

245 days