Which one of the following statements is true if a company's collection period for accounts receivable is unacceptably long?

Question

Quizplus · Accepted Answer

If a company's collection period for accounts receivable is unacceptably long, it means that customers are taking too much time in paying their bills. This can have a negative impact on the company's cash flows from operations as it has to wait longer to receive payments. To reduce the collection period, the company may offer sales discounts to incentivize customers to pay their bills early. This can help improve the company's cash flows and reduce its collection costs. Therefore, option B is the correct answer. Option A is incorrect as the collection cost would not be reduced if the collection period is long. Option C is incorrect as cash flows from operations may be lower than expected if the collection period is long. Option D is incorrect as the company should not expand operations with its excess cash if it is having trouble collecting accounts receivable.

Which One of the Following Statements Is True If a Company's