Many firms sell to customers on account as a strategy to stimulate sales.Comparing accounts receivable turnovers over time or between firms requires an analysis of
A)the growth rate in sales.
B)the amount of interest revenue generated.
C)the cost of administering the credit-granting activity.
D)the losses from uncollectible accounts.
E)all of the above.

Question

Quizplus · Accepted Answer

Comparing accounts receivable turnovers involves analyzing various factors that can affect the turnover rate, including the growth rate in sales (which impacts the volume of receivables), the cost of administering credit (as it affects the efficiency and cost-effectiveness of credit policies), and the losses from uncollectible accounts (which directly affect the net receivables and the perceived risk of credit sales). Interest revenue generated is not directly related to accounts receivable turnover, which focuses on the efficiency of collecting receivables rather than the income generated from investments or loans.

Many Firms Sell to Customers on Account as a Strategy