A firm's total investment in accounts receivables depends primarily on the firm's:
A) total sales and cash discount period.
B) cash to credit sales ratio.
C) bad debt ratio.
D) average collection period and amount of credit sales.
E) amount of credit sales and cash discount percentage.

Question

Quizplus · Accepted Answer

The total investment in accounts receivables is determined by the average collection period (how long it takes for customers to pay their bills) and the amount of credit sales (the amount of sales made on credit rather than cash). A longer collection period and higher amount of credit sales will result in a larger investment in accounts receivable.

A Firm's Total Investment in Accounts Receivables Depends Primarily on the Firm's