Question

ABC Co. extends credit terms of 45 days to its customers. Its credit collection would be considered poor if its average collection period was ______.

Options

• 30 days

• 36 days

• 47 days

• 37 days

Answer 1

ABC Co. extends credit terms of 45 days to its customers. Its credit collection would be considered poor if its average collection period was 47 days.

Explanation:

A company’s credit collection is considered poor if its average collection period is longer than the credit term offered to its customers. Since ABC Co. allows a credit window of 45 days, taking 47 days means customers are paying late past their due dates. Collecting cash in 30, 36, or 37 days is efficient because it happens well within the allowed timeline.