The Formula for Calculating the Average Collection Period for Accounts

question 42

Multiple Choice

The formula for calculating the average collection period for accounts receivable in days is:

• A) Average receivables divided by net credit sales
• B) Net credit sales divided by average receivables
• C) 365 divided by average receivables
• D) Average receivables x 365 divided by net credit sales

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Definitions:

Nominal Risk-Free Return

The return on an investment with zero risk in nominal terms, not adjusting for inflation.

Spot Rate

The current market price at which a particular asset, such as currency, commodity, or security, can be bought or sold for immediate settlement.

Exchange Rates

The price of one country's currency in terms of another currency, influencing international trade and investment.

Pesos

The currency used in various Latin American countries and the Philippines, symbolized by "$" or "₱" depending on the country.