Calculating Turnover of Accounts Receivable

Question:

Is it true that the turnover of accounts receivable can be calculated by dividing 365 days by average collection period?

Answer:

True. The turnover of accounts receivable can be calculated by dividing 365 days by average collection period.

Explanation:

The turnover of accounts receivable measures how quickly a company collects payments from its customers. It is calculated by dividing 365 days by the average collection period, which represents the average number of days it takes to collect payments from customers.

For example, if the average collection period is 30 days, the turnover of accounts receivable would be 365/30 = 12.1. This means, on average, the company collects payments from its customers 12.1 times a year.