![]() This is important because as the average collection period increases, more clients are taking longer to pay. It tells early signals of bad allowances.This gives deeper insight into what other companies are doing and how a company's operations compare. This is important because all figures needed to calculate the average collection period are available for public companies. It tells how competitors are performing.This is important as strict credit terms may scare clients away on the other hand, credit terms that are too loose may attract customers looking to take advantage of lenient payment terms. Until cash has been collected, a company is yet to reap the full benefit of the transaction. This is important because a credit sale is not fully completed until the company has been paid. It tells how efficiently debts are collected.As such, they indicate their ability to pay off their short-term debts without the need to rely on additional cash flows. AR is listed on corporations' balance sheets as current assets and measures their liquidity. Companies normally make these sales to their customers on credit. ![]()
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