Which of the following is TRUE of days' sales in receivables?
A) Days' sales in receivables measures how many days it takes to order and receive inventory.
B) Days' sales in receivables measures how frequently during the year the accounts receivable are collected.
C) Days' sales in receivables measures how many days it takes to sell inventory.
D) Days' sales in receivables measures how slowly the inventory is depreciated.

Question

Quizplus · Accepted Answer

Days' sales in receivables measures how frequently during the year the accounts receivable are collected. It is a ratio that shows the average number of days it takes for a company to collect payment from its customers after a sale has been made. It is calculated by dividing the ending accounts receivable balance by the average daily sales.

Which of the Following Is TRUE of Days' Sales in Receivables