RE: The Ratio for Average Collection Period
I am able to calculate the first year (2018) as we are given the opening balance from the previous year in the additional text below to add to the current year.
In terms of calculating 2019 – do I add the total from 2018 ($7,300) instead to the new total from 2019?
Average Collection Period = (Average accounts receivable x 365 days)/Credit Sales
Average accounts receivable = (Opening AR Balance + Closing AR balance)/2
2017,2018 ,2019 AR balances are available for you to calculate average AR balances for both years, Note that one year closing balance will become the opening balance of following year.
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