Question

net credit sales=rs 1,00,000. average debtors= rs 25,000. so collection period is for how many months

Answer 1

Answer:

3 months

Explanation:

Collection period ( can be computed as:

$Collection period = \frac{12}{receivable \: turnover}$

$= 12 \div 4 = 3$

Receivables' turnover can be computed as :

$receivable \: turnover = \frac{credit \: sales}{average \: accounts \: receivable} \\ receivable \: turnover = \frac{100000}{25000} = 4$