Question

The ______ is useful in evaluating credit and collection policies.

Options

• Average Payment Period

• Current Ratio

• Average Collection Period

• Current Assets Turnover

Answer 1

The Average Collection Period is useful in evaluating credit and collection policies.

Explanation:

The average collection period measures the number of days it takes for a company to collect cash from its customers after a credit sale. It helps evaluate credit policies by showing whether collection terms are strict or too lenient. A short period means quick collections, while a long period indicates slow collections that can tie up cash and increase bad debts.