Which of the following statements is true?
A)The receivables turnover ratio indicates the average number of times the company completes the selling and collecting cycle during the year.
B)The days-to-collect measure is 365 divided by the receivables turnover ratio.
C)The receivables turnover ratio and days-to-collect measure move in opposite directions.
D)All of the answers are acceptable.

Question

Quizplus · Accepted Answer

All the statements provided are correct. The receivables turnover ratio indeed shows how often a company goes through its selling and collecting cycle in a year, the days-to-collect measure (or average collection period) is calculated by dividing 365 by the receivables turnover ratio, and because of this calculation method, as the receivables turnover ratio increases, the days-to-collect measure decreases, indicating they move in opposite directions.

Which of the Following Statements Is True