If the receivables turnover ratio rises significantly,the increase may be a signal that the company is extending credit to high-risk borrowers or allowing an overly generous repayment schedule.

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The receivables turnover ratio measures the number of times receivables turn over during the period.A higher ratio means faster (better)turnover.Extending credit to high-risk borrowers or allowing an overly generous repayment schedule would most likely slow down collections,which would increase Accounts Receivable,and cause the receivables turnover ratio to decrease.

If the Receivables Turnover Ratio Rises Significantly,the Increase May Be