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Days Receivables – Meaning, Formula, Calculation & Interpretations [Video]

Days Receivables – Meaning, Formula, Calculation & Interpretations

In this tutorial we will take a closer look at the meaning, interpretation, and relevance of days receivables ratio. We will understand the calculations and evaluate the results using the Colgate Case Study.

You can download the Colgate Days Receivables Ratio template from this link – https://www.wallstreetmojo.com/ratio-analysis-template/

What is Days Receivables?
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Days receivable, also known as the average collection period, is the time it takes for a company to convert its credit sales (accounts receivable) into cash.

Formula
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Days Receivables Formula = 365 / Accounts Receivables Turnover Ratio

Why is days receivables or the collection period important?
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Knowing the collection period is extremely beneficial to any business for two reasons:
– First, the collection period determines a significant portion of the company’s cash flow.
– Second, knowing the collection period ahead of time allows a company to decide how to collect the money owed to the market.

For more details, you can refer to our article – https://www.wallstreetmojo.com/average-collection-period/

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