In a common size statement, a firm shows average receivables of 9.3%. Its receivables turnover equals 1.23. What's the average receivables collection period?
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A. B. C. D.A
Average receivables collection period = 365/receivables turnover. In this case, the collection period = 365/1.23 = 296.8 days.
To calculate the average receivables collection period, we need to use the formula:
Average Receivables Collection Period = 365 days / Receivables Turnover
Given that the firm shows average receivables of 9.3% and a receivables turnover of 1.23, we can plug these values into the formula:
Average Receivables Collection Period = 365 days / 1.23
Now, let's calculate the average receivables collection period:
Average Receivables Collection Period = 365 days / 1.23 Average Receivables Collection Period ≈ 297.15 days
Rounded to the nearest whole number, the average receivables collection period is approximately 297 days.
Among the answer choices provided, the closest option to 297 days is:
A. 296.8 days
Therefore, the correct answer is A. 296.8 days.