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Up3
Can someone explain how to calculate the average collection days. I see the % as a total (200/500 = 40% as an example for march). However, how do you get the average collection days or is this GIVEN.
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Up0
It doesn’t look like there’s enough context to 100% say for sure.
Average collection period formula is for the entire year:
average collection period=receivables still duetotal credit sales for the year×365
So extrapolating that formula for intervals as per the example you get, e.g. for <31 days:
average collection period (<31)=receivables still due for <31 daystotal credit sales within last 31 days×31
Unless that info is given (credit sales for the various intervals) I’d say that’s just a given value for the purposes of that specific example. Unless maybe there’s more info before the bit you included here.
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