A financial indicator that measures the average number of days it takes for a company to receive payments from its customers within a fiscal year. This ratio is calculated by dividing the number of days in a fiscal year by the accounts receivable turnover ratio. The longer a company to pay its bills the more likely it is to experience cash flow challenges. Notably this receivable is normally interest free and is viewed a lost opportunity to use cash for other purposes. Classified as an activity ratio.
