Companies does make sales for cash or on a credit basis. Several categories of customers exist and to meet their demand, selling goods on credit is of an essential role. Receivables are often debited when credit sales are made. The number of days' sales in receivables an estimate of the length of time the receivables have been outstanding.
The days sales outstanding calculation, can also be called the average collection period or days' sales in receivables
It often measures the number of days it takes a firm to take cash from its credit sales.
This calculation often depicts the liquidity and efficiency of a firm's collections department.
Accounts receivable turnover is compared to number of days sales in receivables. It is often done by dividing 365 by the accounts receivable turnover ratio yields the accounts receivable turnover in days. It gives the average number of days it takes customers to pay their debts.
Conclusively, the accounts receivable days is a formula that helps an individual to fine out how long it takes to clear your accounts receivable.
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