days accounts receivable (Days A/R) definition

days accounts receivable (Days A/R)

Average number of days a firm 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 be preventing higher sales revenue. Also called days sales in receivables or debtor days. Formula: Average accounts payable x 365 ÃÂ· sales revenue.

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