What is the average collection period for Illini Company’s accounts receivable? (Round to the nearest tenth days)
First, you need to calculate the receivables turnover ratio, as follows:
Receivables turnover ratio= $8,000,000($700,000+500,000)/2
Average collection period= \frac{365}{13.33}
Illini Company takes slightly longer to collect its accounts receivable (27.4 days compared to the industry average of 25 days).