For example, a company with an inventory-receivables turnover ratio of 10 would have an average collection period of 365 divided by 10, or approximately 36.5 days.

In this case, the average collection period is 109.5 days. The smaller this number, the more efficient an analyst could interpret their receivables management . Types of Industries and Accounts ...

For companies with a high percentage of credit sales, the average collection period may give a better indication of how successfully the company is converting its credit sales to cash.