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Collection Ratio

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Collection ratio
The ratio of a company's accounts receivable to its average daily sales, which gives the average number of days it takes the company to convert receivables into cash.

Collection Ratio
In accounting, a company's average collection period. Usually calculated monthly, it is the relationship between outstanding accounts receivable and total sales over a given period. The collection ratio is a common tool in measuring liquidity. Tracking trends in the collection ratio over time can also indicate the level of credit risk a company is willing to extend at different points of time. It is also called days sales outstanding.


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The financial services department fixed this by scrapping that measure and implementing two new measures, overdues (dollar target) and collection ratio (dollars collected/total dollars due).
 
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