Which of the following statements about the receivables turnover analysis is correct?
A)Accounts receivable decline as companies sell on credit.
B)Accounts receivable increase as companies receive payment.
C)Receivables turnover refers to how fast receivables are collected.
D)The days to collect will increase as the receivables turnover increases.

Question

Quizplus · Accepted Answer

The receivables turnover ratio measures the number of times receivables turn over during the period.The higher the ratio,the faster the collection of receivables.Accounts receivable would increase (rather than decrease)as companies sell on credit and decrease when (rather than increase)when payments are collected.The days to collect ratio is calculated by dividing 365 by the receivables turnover ratio;as a result,the days to collect ratio would decrease (rather than increase)when the receivables turnover increases.

Which of the Following Statements About the Receivables Turnover Analysis