Which of the following is helpful in evaluating the credit and collection policies of the company?

Average payment period Average collection period Current ratio Inventory turnover ratio

Average collection period

The liquidity position of the firm depends upon the speed with which trade receivables are realised. Trade Receivable Turnover ratio indicates the number of times the receivables are turned over and converted into cash in an accounting period. Higher turnover means speedy collection from trade receivable. This ratio also helps in working out the average collection period. The ratio is calculated by dividing the days or months in a year by trade receivables turnover ratio.