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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.