Which of the following groups of ratios measure a company's ability to sell inventory and collect receivables?
A)Current ratio, inventory turnover and accounts receivable turnover
B)Inventory turnover, accounts receivable turnover and rate of return on net sales
C)Inventory turnover, accounts receivable turnover and days' sales in receivables
D)Days' sales in receivables and rate of return on net sales

Question

Quizplus · Accepted Answer

Inventory turnover measures how quickly a company sells its inventory, while accounts receivable turnover measures how quickly a company collects payment from customers. Days' sales in receivables measures how long it takes a company to collect payment from customers. These ratios together provide a comprehensive picture of a company's ability to sell inventory and collect receivables. Choices A, B, and D do not include all three of these ratios.

Which of the Following Groups of Ratios Measure a Company's