Certified Revenue Cycle Representative (CRCR) Practice Exam

Days in Accounts Receivable (A/R) is calculated based on the value of what?

1. Total cash received to date

2. The time it takes to collect anticipated revenue

3. The total accounts receivable on a specific date

4. Total anticipated revenue minus expenses

The correct answer is: The total accounts receivable on a specific date

Days in Accounts Receivable (A/R) is a key performance metric that assesses how effectively a company collects payments from its customers. It is specifically calculated based on the total accounts receivable on a specific date. This figure represents the outstanding money owed to the company by its customers for goods or services that have been delivered but not yet paid for. By using the total accounts receivable, the calculation can provide insight into how many days it typically takes to convert these receivables into cash, reflecting on the company’s credit policies and customer payment behavior. A high number of days in A/R may indicate problems with collection processes or customer payment trends, while a lower number suggests efficiency in collecting outstanding debts. While the other options touch on relevant aspects of accounting and cash flow, they do not directly reflect the calculation basis for Days in A/R. For instance, total cash received to date pertains more to liquidity than to the receivable metrics, while the time it takes to collect anticipated revenue requires forecasting, not just current receivables. Lastly, total anticipated revenue minus expenses relates to net income rather than focusing on accounts receivable.