Trade receivables are KSh 90,000 and annual credit sales KSh 1,095,000. What is the receivables collection period in days (365 days a year)?
Answer and explanation
Correct answer: B. 30 days
- Step 1: Collection period = receivables / credit sales x 365. Step 2. = 90,000 / 1,095,000 x 365 = 30 days. Answer: 30 days. Why not the others: 4,440.83 days: That turns the fraction upside down. 0.99 days: That uses 12 months as if it were days. 39.59 days: That adds ten days to the correct figure.
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