If credit sales for the year is Rs 5,40,000 and Debtors at the end of year is Rs 90,000 the Average Collection Period will be

Solution (By Examveda Team)

Rs. 540000 divided by Rs. 90,000 = 6 times per year. Since there were 365 days during the recent year, the average collection period is 365 days divided by the turnover ratio of 6 = 60.8333 days or 61 days.