CFA CFA Level 1 Weighted Average Collection Period: calculate ‘average collection days’?

# Weighted Average Collection Period: calculate ‘average collection days’?

Topic Resolution: Resolved
• Author
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• pcunniff
Participant
• CFA Level 1
2

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.

• 0

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.