What is the average collection period for Year 2, rounded to the nearest 1 decimal place?

Rationale

The average collection period for Year 2 is 27.1.

The average collection period is calculated by dividing the accounts receivable by the average daily sales. For Year 2, the calculated average collection period is 27.1 days when rounded to the nearest one decimal place.

A (19.1) YOUR ANSWER

This value does not accurately reflect the average collection period for Year 2. It is significantly lower than the calculated result, suggesting an underestimation of either accounts receivable or average daily sales.

B (27.1) CORRECT

This is the correct answer, as it represents the accurately calculated average collection period for Year 2. It reflects the proper ratio of accounts receivable to average daily sales, rounded to one decimal place.

C (20.8) YOUR ANSWER

This option suggests a shorter collection period than what was calculated for Year 2. It does not align with the sales data and accounts receivable figures, indicating a miscalculation in deriving this average.

D (24.9) YOUR ANSWER

This choice falls between the correct answer and a significant underestimation. While it is closer to a plausible average collection period, it still does not represent the actual calculation outcome based on provided financial data for Year 2.

Conclusion

The average collection period is a crucial metric for assessing a company's efficiency in managing its receivables. In Year 2, an accurate analysis yields an average collection period of 27.1 days, illustrating the time taken to collect payments from customers. This figure is essential for financial planning and liquidity management, while the other options fail to reflect the actual data calculations.

What is the average collection period for Year 2, rounded to the nearest 1 decimal place?

The average collection period for Year 2 is 27.1.

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