How is the average collection period computed? a : by dividing net credit sales by ending gross accounts receivable b : by dividing 365 days by the accounts receivable turnover ratio c : by dividing net credit sales by average gross accounts receivable d : by dividing the accounts receivable turnover ratio by 365 days

B : by dividing 365 days by the accounts receivable turnover ratio

The reason for this is that the accounts receivable turnover ratio tells us the efficiency of a company in collecting its receivables. A ratio of 10 tells us that a company collects its average receivables 10 times a year. When we divide 365 by we get 36.5 which suggests that a company takes 36.5 days to collect its average receivables.

Explanation:

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