One formula for calculating the average collection period 365 days in a year divided by the accounts receivable turnover ratio. The average collection period therefore would be 365 daysnot a bad figure considering. Average Collection Period 365 Days AR Turnover Ratio Example using Formula 1 Assume that a company had on average 40000 of accounts receivable during the most recent year.
The average collection period therefore would be 365 daysnot a bad figure considering.
One example of the need for this formula is in banking. ACP 365 Accounts Receivable Turnover The Accounts Receivable Turnover rate indicates the number of times a business net credit sales are turned into cash within a year or during a certain period of time. The quotient then must be multiplied by 365 because the calculation is to determine the average collection period for the year. One example of the need for this formula is in banking.