Which of the following statements regarding the receivables turnover ratio is true?
A)The receivables turnover ratio indicates how many times,on average,the process of selling to and collecting from customers occurs during the accounting period.
B)Companies of similar size in different industries tend to have similar receivables turnover ratios.
C)A high turnover ratio may suggest the company is allowing too much time for customers to pay.
D)The days to collect ratio is found by dividing the receivables turnover ratio by 365 days.

Question

Quizplus · Accepted Answer

The statement "The receivables turnover ratio indicates how many times, on average, the process of selling to and collecting from customers occurs during the accounting period" is true. The receivables turnover ratio is calculated by dividing net credit sales by the average accounts receivable balance during a period, and it measures the efficiency of a company in collecting its accounts receivable. A high turnover ratio indicates that a company is collecting its accounts receivable quickly.

Which of the Following Statements Regarding the Receivables Turnover Ratio