The average collection period
or receivables collection period correspond to the average time in days for which business has to wait before its receivables are converted into cash.
57 Days Sales Outstanding (DSO) or Average Collection Period
(days) 33 42.
Accurately knowing your average collection period is crucial to any foundry, since financing accounts receivable can be a significant drain on working capital.
As a rule, the shorter the average collection period, the more likely your customers will pay.
It is good practice to calculate your average collection period once a month and consider it a key barometer of financial health.
Moving on to one of the aspects of receivables financing that led to a consideration of a change in the level of cash discounts, the length of the average collection period
, we find a more satisfactory situation.
20 * Sales/360 ** 360/inventory turnover 2005 2006 2007 Actual Actual Actual Average Collection Period
(360 days) *** 40.
Accounts receivable outstanding at the end of the first quarter represents a 42 day average collection period
Accounts receivable outstanding at the end of the third quarter represents a 51 day average collection period
Other factors covered include Gross Margins, Sales/Marketing Expenses as a Percentage of Sales, R&D as a Percentage of Sales, Average Collection Period
, and the Ratio of Long-Term Liabilities to Total Liabilities.