The days' sales uncollected ratio is used to:
A)Measure how many days of sales remain until the end of the year.
B)Determine the number of days that have passed without collecting on accounts receivable.
C)Identify the likelihood of collecting sales on account.
D)Estimate how much time is likely to pass before the current amount of accounts receivable is received in cash.
E)Measure the amount of cash sales during a period.

Question

Quizplus · Accepted Answer

The days' sales uncollected ratio is used to estimate how much time is likely to pass before the current amount of accounts receivable is received in cash. It is also known as the average collection period and helps in assessing the efficiency of a company's credit and collection process. Option A is incorrect because it is not related to the purpose of this ratio. Option B is incorrect because it measures the number of days passed without collecting on accounts receivable, which is different from the purpose of this ratio. Option C is incorrect because the likelihood of collecting sales on account is not directly related to this ratio. Option E is incorrect because this ratio does not measure cash sales.

The Days' Sales Uncollected Ratio Is Used To