COLLECTION PERIOD (Period End) Definition

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COLLECTION PERIOD (Period End) is used to appraise accounts receivable (AR). This ratio measures the length of time it takes to convert your average sales into cash. This measurement defines the relationship between accounts receivable and cash flow. A longer average collection period requires a higher investment in accounts receivable. A higher investment in accounts receivable means less cash is available to cover cash outflows, such as paying bills. NOTE: Comparing the two COLLECTION PERIOD ratios (Period Average and Period End) suggests the direction in which AR collections are moving, thereby giving an indication as to potential impacts to cash flow. Formula: AR (current) / (Net Revenue / 365)

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ACQUISITION COST is the amount, net of both trade and cash discounts, paid for property, plus transportation costs and ancillary costs.

BLANKET AUTHORIZATION is direct authority to act without having to gain approval for each action. For example: "Blanket authorization was given to him for all his business travel".

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