Question:The average time in days taken to collect debts in any year can be measured by:
A. (credit revenue x 365) divided by (0.5 (opening + closing receivables)).
B. (credit revenue) divided by (0.5 (opening + closing receivables) x 365).
C. (0.5 (opening + closing receivables) x 365) divided by (credit revenue).
D. (0.5 (opening + closing receivables)) divided by (credit revenue x 365).
The correct answer is:(0.5 (opening + closing receivables) x 365) divided by (credit revenue).
You will need to learn the formulae for working capital management.
i.e. Receivables turnover period = (Average receivables) x 365 divided by (credit revenue).
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