Noble Company's accounts receivable turnover was 24.6 in Year 1 and 18.2 in Year 2. This change in accounts receivable turnover indicates:
A) the company is not selling its inventory as fast.
B) the company is selling its inventory faster.
C) the company's customers are paying faster.
D) the company's customers are paying slower.

Question

Quizplus · Accepted Answer

A decrease in accounts receivable turnover (from 24.6 to 18.2) indicates that the company's customers are taking longer to pay their debts, hence paying slower. This ratio measures how quickly a company collects outstanding receivables, so a lower number suggests slower collection.

Noble Company's Accounts Receivable Turnover Was 24