Which formula defines A/R Days according to the material?

Which formula defines A/R Days according to the material?

• A. Ending A/R / COGS * Number of Days of COGS
• B. Ending A/R / Revenue * Number of Days of Sales
• C. Ending A/R / Sales * Number of Days of Sales
• D. Ending A/R / Sales

Answer: (D)

A/R Days measures how long it takes to collect on credit sales by linking the ending accounts receivable to the level of sales for the period. The material defines it as Ending A/R divided by Sales, which directly ties the amount of receivables at period end to the revenue generated, giving a sense of the size of receivables relative to sales. This form focuses on turnover of receivables from the perspective of revenue, avoiding inputs tied to cost of goods sold that don’t describe collection speed. In short, it provides the intended relationship between the receivables balance and the period’s sales, making it the best representation in the material.

A/R Days measures how long it takes to collect on credit sales by linking the ending accounts receivable to the level of sales for the period. The material defines it as Ending A/R divided by Sales, which directly ties the amount of receivables at period end to the revenue generated, giving a sense of the size of receivables relative to sales. This form focuses on turnover of receivables from the perspective of revenue, avoiding inputs tied to cost of goods sold that don’t describe collection speed. In short, it provides the intended relationship between the receivables balance and the period’s sales, making it the best representation in the material.