If a firm has $400,000 in credit sales and $80,000 in average accounts receivable,what will happen to average days collections if accounts receivable increases?
A)Average days collections will stay the same.
B)Average days collections will increase.
C)Average days collections will decrease.
D)Cannot tell with the information provided.

Question

Quizplus · Accepted Answer

If accounts receivable increases while credit sales remain the same, it means that customers are taking longer to pay their bills, which results in a higher average days collections.

If a Firm Has $400,000 in Credit Sales and $80,000