Collection ratio

Collection ratio

The ratio of a company's accounts receivable to its average daily sales, which gives the average number of days it takes the company to convert receivables into cash.

Days' Sales Outstanding

In accounting, a company's average collection period. Usually calculated monthly, it indexes the relationship between outstanding accounts receivable and total sales over a given period and is a common tool in measuring liquidity. Tracking trends in days' sales outstanding can also indicate the level of credit risk a company is willing to extend at different points of time. It is also called the collection ratio.