In the first formula to calculate Average collection period we need the Average Receivable Turnover and we can assume the Days in a year as 365. The Average Collection Period calculation formula is as follows. Determine net credit sales.
The average collection period formula is the number of days in a period divided by the receivables turnover ratio.
Determine net credit sales. Period 365 times dfrac250000400000 22813. We can apply the values to our variables and calculate the average collection period. Accounts Receivables at the beginning of the year 20000.