Which financial metric is described as the ratio of average receivables to daily sales?

The average collection period is a key financial metric used to assess how efficiently a company manages its accounts receivable. It is calculated by taking the average accounts receivable and dividing it by the average daily sales. This metric provides insights into how many days it typically takes a company to collect payments from its customers after a sale has been made.

Understanding the average collection period is crucial for managing cash flow, as a shorter collection period often indicates better efficiency and liquidity in the company’s operations. It reflects the company’s ability to convert sales into cash quickly, which is vital for maintaining operational stability and investing in growth opportunities.

In contrast, the other options describe different aspects of financial performance or health. The liquidity ratio assesses a company's ability to meet its short-term obligations, the profit margin evaluates the profitability relative to sales, and the asset turnover ratio measures how efficiently a company uses its assets to generate sales. Each of these metrics provides valuable information, but they serve different purposes and do not specifically reflect the relationship between receivables and sales as the average collection period does.