Which of the following statements about the interpretation of the receivables turnover ratio is not correct?
A) Analysts often interpret a sudden increase in the receivables turnover ratio as a signal of a developing problem.
B) The smaller the receivables turnover ratio the larger the days to collect will be.
C) A change in the receivables turnover ratio may indicate a change in the company's credit granting policies.
D) A change in the receivables turnover ratio may indicate a change in economic conditions.

Question

Quizplus · Accepted Answer

Analysts often interpret a sudden decrease in the receivables turnover ratio as a signal of a developing problem, not an increase. A higher receivables turnover ratio indicates a more efficient collection of accounts receivables, which is generally viewed positively.

Which of the Following Statements About the Interpretation of the Receivables