Days' sales in receivables may be abnormally high if a material amount of sales are on a cash basis.

Question

Quizplus · Accepted Answer

Days' sales in receivables measures the average amount of time it takes for a company to collect payments from its customers. If a material amount of sales are on a cash basis, there would be no receivables and therefore days' sales in receivables would not be relevant. Therefore, days' sales in receivables would not be abnormally high in this situation.

Days' Sales in Receivables May Be Abnormally High If a Material