MANAGEMENT

Detailed explanation-1: -The formula for calculating the average collection period is 365 (days) divided by the accounts receivable turnover ratio or average accounts receivable per day divided by average credit sales per day. The accounts receivable turnover ratio formula is net credit sales divided by average accounts receivable.

Detailed explanation-2: -You can calculate the inventory turnover ratio by dividing the inventory days ratio by 365 and flipping the ratio. In this example, inventory turnover ratio = 1 / (73/365) = 5. This means the company can sell and replace its stock of goods five times a year.

Detailed explanation-3: -Explanation: Average sales period = (Average inventory * 365 days) / Cost of sales.

Detailed explanation-4: -Average collection period is calculated by dividing a company’s average accounts receivable balance by its net credit sales for a specific period, then multiplying the quotient by 365 days.