A company's number of days to collect is higher than the length of credit period.Analysts might conclude:
A)customers are dissatisfied with the product or service they bought.
B)the company is effectively managing its receivables.
C)the company has begun estimating the amount of uncollectibles using percentage of net sales rather than aging the receivables.
D)the company's payment terms have been tightened and customers are paying within the payment period granted.

Question

Quizplus · Accepted Answer

By comparing the number of days to collect to the length of credit period,analysts can gain a sense of whether customers are complying with the stated policy.Managers inside a company watch this closely,and so do investors and creditors on the outside.If customers appear to be disregarding the stated credit period,it may be a sign they are dissatisfied with the product or service they bought.If the company's payment terms have been relaxed,the length of the credit period and the number of days to collect would both increase.If the company's payment terms have been tightened,the length of the credit period and the number of days to collect would both decrease.The method used to estimate uncollectibles will not impact the length of the credit period nor the number of days to collect.

A Company's Number of Days to Collect Is Higher Than