The days' sales uncollected ratio
A) Is used to evaluate the liquidity of receivables
B) Is calculated by dividing accounts receivable by sales
C) Measures a company's ability to pay its bills on time
D) Measures a company's debt to income
E) Is calculated by dividing sales by accounts receivable

Question

Quizplus · Accepted Answer

The days' sales uncollected ratio is used to evaluate the liquidity of receivables, which is the ability of a company to convert its receivables into cash in a timely manner. It calculates the average number of days it takes for a company to collect its accounts receivable. Options B, C, D, and E are incorrect as they do not accurately describe the purpose or calculation method of this ratio.

The Days' Sales Uncollected Ratio