Question

What does it mean when a firm has a days' sales in receivables of 45?

a. the firm is able to collect 55 percent of its credit sales
b. the firm is able to collect 45 percent of its credit sales
c. the firm collects its credit sales in 45 days on average
d. the firm collects its credit sales in 320 (360-45) days on average

Answer 1

A firm with a days' sales in receivables of 45 collects its credit sales in 45 days on average.

Step-by-step explanation:

When a firm has a days' sales in receivables of 45, it means that the firm collects its credit sales in 45 days on average. This is the average number of days it takes for the firm to receive payment for the credit sales it makes. It is an indicator of how quickly the firm is able to collect payments from its customers.