Join Curt Frye for an in-depth discussion in this video Calculating the average collection period, part of Excel 2007: Financial Analysis.
The name of the Average Collection Period ratio is a bit misleading.…After all, how can an analyst accurately measure how long on average it takes…a company to collect on its debts without having access to data on every transaction?…The answer, of course, is that they can't, but you can discover useful…information about a company's collection from its public data.…The Average Collection Period ratio is calculated in two parts.…In the first step, you divide Total Sales by Accounts Receivable, which is the…amount yet to be paid for completed sales to calculate the Receivables Turnover ratio.…
So on this worksheet, we have Total Sales, Accounts Receivable and Days in Year,…which we'll use later.…So to calculate the Receivables Turnover ratio, it's equal B5 divided by B6 and…there you have that ratio and again, it tells you how many times in a year a…company earns the money currently owed by its creditors.…You can compare the Receivables Turnover ratio to the Times Interest Earned…ratio, which I'll cover elsewhere in this course.…
Author
Released
8/25/2009- Building a financial worksheet with Pivot Tables
- Reviewing financial statements through common-sized balance sheets
- Calculating percentage change over time in financial statements
- Determining profitability ratios and return on investments
- Studying liquidity and activity ratios through an average collection period
- Computing the future value of an investment
Skill Level Intermediate
Duration
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Introduction
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Welcome1m 8s
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Disclaimer26s
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1. Designing a Financial Worksheet
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Avoiding common mistakes5m 39s
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2. Analyzing Cash Flows Using Excel Tables and Pivot Tables
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Pivoting a Pivot Table2m 22s
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Filtering a Pivot Table3m 11s
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3. Analyzing Financial Statements
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4. Calculating Profitability Ratios
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5. Calculating Liquidity and Activity Ratios
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6. Calculating Leverage Ratios
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Calculating the equity ratio1m 26s
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Calculating the debt ratio2m 57s
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7. Calculating the Effect of Interest Rates on Loan Repayment
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8. Determining Future Cash Flows
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Calculating present value2m 29s
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9. Forecasting Future Growth
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10. Determining Amortization and Depreciation Schedules
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Introducing amortization2m 20s
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Introducing depreciation2m 1s
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11. Analyzing Bond Investments
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Calculating a bond's yield2m 15s
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Conclusion
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Goodbye23s
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Video: Calculating the average collection period