Dictionary of Business Terms: collection ratio
collection ratio
ratio of a company's accounts receivable to its average daily sales. The collection ratio is the average number of days it takes the company to convert receivables into cash. It is also called average collection period.
Dictionary of Finance and Investment Terms: collection ratio
collection ratio
ratio of a company's accounts receivable to its average daily sales. Average daily sales are obtained by dividing sales for an accounting period by the number of days in the accounting period-annual sales divided by 365, if the accounting period is a year. That result, divided into accounts receivable (an average of beginning and ending accounts receivable is more accurate), is the collection ratio-the average number of days it takes the company to convert receivables into cash. It is also called average collection period.
