Final answer:
The 'number of days' sales in average receivables ratio' measures the average number of days it takes for a company to collect payment from its customers after a sale. The formula to calculate this ratio is (Average Accounts Receivable / Net Credit Sales) x 365.
Step-by-step explanation:
The 'number of days' sales in average receivables ratio' measures the average number of days it takes for a company to collect payment from its customers after a sale. It is an important measure of a company's efficiency in managing its accounts receivable. The formula for calculating this ratio is:
Number of days' sales in average receivables ratio = (Average Accounts Receivable / Net Credit Sales) x 365
In this formula, 'Average Accounts Receivable' is the average amount of money owed to the company by its customers, and 'Net Credit Sales' refers to the total sales made on credit after deducting any sales returns or allowances.