The amount of time that elapses between a sale and receipt of payment for that sale provides information about the financial structure of a company, including how the company manages its receivables. Calculating days receivable, or the average number of days sales are outstanding, is easy now with this calculator:
Days Receivable Calculator
|Days receivable = =||Accounts receivable balance|
|Average day’s sales = =||Net sales|
Efficiency ratios can indicate how efficiently a business manages its assets. Days receivable is the collect-ability of accounts receivable, answering the question “how fast can cash supply be built?” with a number of days.
Calculating this number of days receivable helps determine if a change in receivables is a result of a change in sales. Comparing days receivable with the company’s credit terms indicates how customers obey the terms of credit.
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