The correct answer is C. 3 months.
The debt turnover ratio is a measure of how quickly a company collects its receivables. It is calculated by dividing the company’s net credit sales by its average accounts receivable. A higher debt turnover ratio indicates that a company is collecting its receivables more quickly.
The average collection period is the average number of days it takes a company to collect its receivables. It is calculated by dividing the company’s average accounts receivable by its net credit sales per day.
If the debt turnover ratio is 4, then the average collection period is 3 months. This means that it takes a company an average of 3 months to collect its receivables.
Option A is incorrect because 5 months is longer than the average collection period.
Option B is incorrect because 4 months is equal to the debt turnover ratio.
Option D is incorrect because 2 months is shorter than the average collection period.