January 2022

In the first formula, we first need to determine the accounts debtor collection period formula receivable turnover ratio. If this company’s average collection period was longer—say, more than 60 days— then it would need to adopt a more aggressive collection policy to shorten that time frame. Otherwise, it may find itself falling short when it …

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Therefore, the working capital metric is considered to be a measure of liquidity risk. If the company decides to do the Collection period calculation for the whole year for seasonal revenue, it wouldn’t be just. Average collection period boils down to a single number; however, it has many different uses and communicates a variety of …

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