Ratios: Average Collection Period (Days Sales Outstanding) definitions Flashcards
Ratios: Average Collection Period (Days Sales Outstanding) definitions
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Average Collection Period Represents the typical number of days a receivable remains outstanding before being collected from customers. Days Sales Outstanding Alternative name for the metric showing the average time it takes to collect payment after a credit sale. Accounts Receivable Represents amounts owed by customers for credit sales, temporarily tying up company funds until collected. Efficiency Ratio Category of financial metrics used to assess how effectively a company manages its assets and operations. Accounts Receivable Turnover Ratio Indicates how many times, on average, receivables are collected during a period, reflecting collection efficiency. Net Credit Sales Total sales made on credit, minus returns and allowances, forming the numerator in the AR turnover calculation. Average Accounts Receivable Calculated by adding beginning and ending receivable balances and dividing by two, used in turnover formulas. Benchmarking Process of comparing a company's performance metrics to industry averages or competitors to assess effectiveness. Industry Average Represents the typical value for a metric within a specific sector, used as a standard for comparison. Contra Account Account that reduces the balance of a related account, such as allowances that lower accounts receivable. Credit Sales Transactions where goods or services are sold with payment to be received at a later date. Inventory Replenishment Process of restocking goods, which can be delayed if funds are tied up in uncollected receivables. Numerator Top part of a fraction in a ratio calculation, such as net sales in the AR turnover formula. Denominator Bottom part of a fraction in a ratio calculation, such as average accounts receivable in turnover ratios. Collection Performance Assessment of how quickly and efficiently a company receives payments from its customers.
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