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Average collection period

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Sayed Arif
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Average collection period - December 13th, 2013

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Asad Khan
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Re: Average collection period - December 13th, 2013

Average collection period is also referred to as Days sales outstanding (DSO). It refers to the collection efficiency of the organization or the average number of days it takes for the organization to collect the receivables after a sale has been made.
Mathematically,

Example
Consider an organization with an average accounts receivable of Rs. 100 with an annual sales of Rs. 1000.
DSO = (100/1000)*365 = 36.5 days
This implies that on an average the company takes 36.5 days to collect the receivables after the sale has been made.
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