FIN 375 Week 2 Participation Discussion Question 2

Each week three graded discussion questions are available for student responses. Each DQ is worth 20 points. You can do original posts or reply to other student posts.

The average collection period ratio is defined as shown below:

Accounts Receivable / (sales/ 365)

It shows how many days, on average, it takes to collect your receivables.

If your average collection period was 30 days last year and it is now 45 days, what does that imply? What is happening to your cash position?

What are some things you might do to reduce your average collection period?