The Average Collection Period Is Computed by Dividing

question 191

Multiple Choice

The average collection period is computed by dividing

• A) net credit sales by average gross accounts receivable.
• B) net credit sales by ending gross accounts receivable.
• C) the accounts receivable turnover by 365 days.
• D) 365 days by the accounts receivable turnover.

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Definitions:

Tangible Goods

Tangible goods are physical items that can be touched and seen, distinguished from services or digital products.

Intangible Services

Services that cannot be physically touched or stored, such as education, consulting, or legal advice.

Inventory

The quantity of goods that a company has in stock, ready for sale or distribution.

Investment Component

A part of economic activity related to spending on goods and services not for immediate consumption but for future benefit.