book, isbn, 978 1 61853 122 3 page.104. question/subsection k.

How might pearson reduce the average collection period closer to 79 days? what actions might be implemented to reduce average collection period? also, what is the receivables turnover ratio and average collection period?

Thank you.

number of turns indicates faster collections. Another common, more intuitive metric, is the average collection period in days, which is easily computed from the accounts receivable turnover ratio as: Use the table below to compute the average collection period for Pearson for 2009 and 2008. You observe. Provide possible reasons for any change in average collection period from 2008 to 2009. 2007, Pearson's total (gross) trade receivables were 1,091 million. Comment on the trend you may assume that all sales are made on account that is, all sales are credit sales. At December 31, A highe This ratio reveals how many times red 365 days Accounts receivable turnover Average collection period (in days) 2009 2008 Credit sales, net Average gross trade receivables Accounts receivable turnover Average collection period Pearson's Chief Financial Officer was assessing Pearson's efficiency in collecting trade receivables by comparing its average collection period with McGraw Hill Publishing, a close competitor to Pearson with a similar business model. He found that McGraw Hill's average collection period was 79.0 days for 2009 and decided to evaluate how Pearson might reduce its average collection period to align more with that of its peer. What actions might he implement to reduce Pearson's average collection period? Pearson plc-Accounts Receivable 3