If a company is having difficulty collecting their accounts receivable, which of the following statements would be true?

Question

Quizplus · Accepted Answer

An increasing average collection period indicates that the company is taking longer to collect their accounts receivable, which is a sign of difficulty in collections. The accounts receivable turnover ratio measures how many times a company can collect its average accounts receivable balance during a period, so if they are having difficulty collecting, this ratio would be decreasing. The current ratio and quick ratio measures a company's liquidity and ability to pay its short-term obligations, but do not directly relate to accounts receivable collection.

If a Company Is Having Difficulty Collecting Their Accounts Receivable