days accounts receivable (Days A/R)

  

Definition

The average number of days a company takes to collect payments on goods sold.

Numbers much higher than 40 to 50 days indicate collection problems and significant pressure on cash flows. Numbers much lower than 40 to 50 days indicate overly-strict credit policies that might prevent higher sales revenue. Also called days sales in receivables or debtor days. Formula: Average accounts payable x 365 √∑ sales revenue.

Use this term in a sentence

  • The company set a goal to keep all of their customers' days accounts receivable under 30 days in order to maintain a healthy cash flow.

    Was this Helpful?   (10)   (0)
Show more usage examples...

Related Videos




http://www.businessdictionary.com/definition/days-accounts-receivable-Days-A-R.html

Have a question about this term? Ask for help in the
Community
advertise here

Browse by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z