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By Finance Mcqs 19 Comments

Standard Company had net sales of Rs. 750,000 over the past year. During that time, average receivables were Rs. 150,000. Assuming a 365-day year, what was the average collection period?

A. 5 days
B. 36 days
C. 48 days
D. 73 days

The average collection period is calculated by dividing the average balance of accounts receivable by total net credit sales for the period and multiplying the quotient by the number of days in the period.
use the following formula:

(Average Receivables/Net Sales)*365

150,000/750,000*365 = 73 days

_________________________________________________

Net sales=750,000
A/C receivables= 150,000
days in a year =365

Collection period= (A/C Receivables/ net sales)*days in a year
= (150,000/750,000)*365= 73 days

Related Mcqs:

  1. During the accounting period, sales revenue is Rs. 25,000 and accounts receivable increases by Rs. 8,000. What will be the amount of cash received from customers for the period?

    A. Rs. 33,000
    B. Rs. 25,000
    C. Rs. 17,000
    D. Rs. 8,000

  2. A firm has paid out Rs. 150,000 as dividends from its net income of Rs. 250,000. What is the retention ratio for the firm?

    A. 12%
    B. 25%
    C. 40%
    D. 60%

  3. Net income available to stockholders is $150 and total assets are $2,100 then return on total assets would be_________?

    A. 0.07%
    B. 7.14%
    C. 0.05 times
    D. 7.15 times

  4. The net income available to stockholders is $150 and total assets are $2,100 then return on total assets would be ________?

    A. 0.0007
    B. 0.0714
    C. 0.05 times
    D. 7.15 times

  5. Collection of net income, amortization and depreciation is divided by common shares outstanding to calculate______________?

    A. Cash flow of financing activities
    B. Cash flow per share
    C. Cash flow of investment
    D. Cash flow of operations

  6. You need Rs. 10,000 to buy a new television. If you have Rs. 6,000 to invest at 5 percent compounded annually, how long will you have to wait to buy the television?

    A. 8.42 years
    B. 10.51 years
    C. 15.75 years
    D. 18.78 years

  7. A firm reports total liabilities of Rs. 300,000 and owner’s equity of Rs. 500,000. What would be the total worth of the firm’s assets?

    A. Rs. 300,000
    B. Rs. 500,000
    C. Rs. 800,000
    D. Rs. 1100,000

  8. Standard Corporation sold fully depreciated equipment for Rs.5,000. This transaction will be reported on the cash flow statement as a(n):

    A. Operating activity
    B. Investing activity
    C. Financing activity
    D. None of the given options

  9. If we were studying a sample of 100 students and their examination performance and if the standard deviation of the list of results was say 14, then we could calculated the standard error by ___________?

    A. Dividing the square root of the number of items in the sample by the mean
    B. Dividing standard deviation by number of items in the sample
    C. Dividing the standard deviation by the square root of the number of items in the sample
    D. We cannot calculate standard error on account of inadequacy of information

  10. Net investment in operating capital is subtracted from net operating profit after taxes to calculate___________?

    A. Relevant inflows
    B. Free cash flow
    C. Relevant outflows
    D. Cash outlay

The correct answer to the question: "Standard Company had net sales of Rs. 750,000 over the past year. During that time, average receivables were Rs. 150,000. Assuming a 365-day year, what was the average collection period?" is "73 days".

Share.

19 Comments

    • Maham Fatima on

      The average collection period is calculated by dividing the average balance of accounts receivable by total net credit sales for the period and multiplying the quotient by the number of days in the period.
      150,000^750,000*365=73 days

      Reply
    • Shumaila Aslam on

      Average Collection Period= (A/c Receivable/Net credit sales)*365
      =(150000/750000)*365
      =73 days

      Reply
  3. Sohail on

    The average collection period is calculated by dividing the average balance of accounts receivable by total net credit sales for the period and multiplying the quotient by the number of days in the period.
    use the following formula:

    (Average Receivables/Net Sales)*365

    150,000/750,000*365 = 73

    Reply
  4. Sabar Hussain on

    Account Receivable Turn over Ratio= Net Credit Sales/Average Debtors
    750000/150000=5
    Average Collection Period= No of days in Year/A.R. Turnover Ratio
    365/5=73 days

    Reply
  5. waseem on

    net sales=750,000
    A/C receivables= 150,000
    days in a year =365

    Collection period= (A/C Receivables/ net sales)*days in a year
    = (150,000/750,000)*365

    Reply
  6. Sohail on

    The average collection period is calculated by dividing the average balance of accounts receivable by total net credit sales for the period and multiplying the quotient by the number of days in the period.

    150,000/750,000*365=73

    Reply
  8. Muhammad Hannan on

    365/750000=…..
    Then
    And answer ko 150000 sy multiple krdo
    Average collection period ajaye ga
    Which is 73

    Reply
  9. Hamza on

    Receivables= 150000
    Net sales= 750000
    Average Collection?

    Average Collection= Receivable /Net Sales * 365

    Average Collection= 150000/750000*365=73 days

    Reply
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