Indicate whether each of the following statements is true or false.
a)The higher the accounts receivable turnover ratio, the longer is a company's cash collection period.b)The accounts receivable turnover ratio is measured as the amount of sales divided by net accounts receivable.c)The average days to collect accounts receivable is measured as 365 divided by the accounts receivable turnover ratio.d)Longer collection periods decrease the costs of collecting from customers.e)A higher average collection period is desirable.

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Quizplus · Accepted Answer

b)True c)True d)False e)Fa)This is false. The higher the accounts receivable turnover ratio, the lower the average number of days to collect accounts receivable.b)This is true.c)This is true.d)This is false. The average number of days to collect accounts receivable measures how many days, on average, it takes a company to collect its accounts receivable. Because longer collection periods increase costs, shorter periods are more desirable.e)This is false. The average collection period measures how many days, on average, it takes a company to collect its accounts receivable. Because longer collection periods increase costs, shorter periods are more desirable

Indicate Whether Each of the Following Statements Is True or False