If a Firm Starts the Year with Receivables of $80,000

question 50

Multiple Choice

If a firm starts the year with receivables of $80,000 and produces sales for the year of $300,000,what is its average collection period?

• A) 3.75 days.
• B) 97.3 days.
• C) 52 days.
• D) 77.9 days

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Definitions:

Fundamental Benefit

A primary or essential advantage that is intrinsic to a product, service, or activity.

ACP

Average Collection Period (ACP) is a financial metric that measures the average number of days it takes for a company to collect payments from its customers after a sale has been made.

Bad Debts

Accounts receivable that a company does not expect to collect and writes off as a loss.

Credit Policy

The guidelines a company follows to determine the creditworthiness of its customers and the terms and conditions of credit it will extend to them.