All of the following are true of the number of days' sales uncollected ratio except:
A)Is most effective in evaluating the cash sales of a company.
B)Can be used for comparisons to other companies in the same industry.
C)Can be used for comparisons between current and prior periods.
D)Reflects the liquidity of receivables.
E)Measures how much time is likely to pass before the current amount of accounts receivable is received in cash.

Question

Quizplus · Accepted Answer

The number of days' sales uncollected ratio is most effective in evaluating the credit sales of a company, not cash sales. This ratio reflects the average number of days that a company takes to collect its accounts receivable, and measures the liquidity of receivables by showing how long it takes for a company to convert its receivables into cash. It can be used for comparisons to other companies in the same industry or between current and prior periods, and measures how much time is likely to pass before the current amount of accounts receivable is received in cash.

All of the Following Are True of the Number of Days