Average Collection Period

Home » CMA Glossary Term » Ratios and Performance Metrics » Average Collection Period

The average collection period definition refers to the time it takes for a company to convert its accounts receivable into cash. It is a crucial metric that helps businesses assess the efficiency of their credit and collection policies. Calculated by dividing the average accounts receivable by the net credit sales and multiplying by the number of days, this ratio provides insights into the liquidity and operational effectiveness of a company.

CMA Exam Academy 16-Week Accelerator Program