## What is debtors turnover ratio and debtors collection period?

The debtors turnover ratio, also called the accounts receivable turnover ratio, is a ratio that is used to gauge the number of times a business is able to convert its credit sales to cash during a financial year. The collection period is when the company takes to convert its credit sales to cash.

## What is the meaning of debtors turnover ratio?

Receivable Turnover Ratio or Debtor’s Turnover Ratio is an accounting measure used to measure how effective a company is in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.

When the debt turnover ratio is for what is the average collection period?

The Correct Answer is “5 months”. The average collection period is the amount of time it takes for a business to receive payments owed by its clients in terms of accounts receivable (AR).

### Is receivables turnover the same as average collection period?

What Is It? The average collection period ratio is closely related to your accounts receivable turnover ratio. While the turnover ratio tells you how often you collect your accounts, the collection period ratio tells you how long it takes you to collect accounts.

### What is average collection period?

The average collection period is the average number of days it takes a business to collect and convert its accounts receivable into cash. It is one of six main calculations used to determine short-term liquidity, that is, the ability of a company to pay its bills (current liabilities) as they come due.

How do you interpret average collection period?

It is calculated by dividing receivables by total sales and multiplying the product by 365 (days in the period). To determine whether or not your average collection period results are good, simply compare your average against the credit terms you offer your clients.

## What is average collection period ratio?

The average collection period ratio measures the average number of days clients take to pay their bills, indicating the effectiveness of the business’s credit and collection policies. This ratio also determines if the credit terms are realistic.