Which of the following statements is true?

Question

Quizplus · Accepted Answer

An increasing accounts receivable turnover figure signifies a reduction in the average number of days to collect accounts receivable. This means that the company is collecting its accounts receivable more efficiently, which is a positive sign for its cash flow and overall financial health. Option A is incorrect because a high accounts receivable turnover figure indicates that the company is collecting its accounts receivable more quickly, which would lead to a lower level of accounts receivable and hence, a lower current asset ratio. Option C is incorrect because an increase in selling prices would lead to a decrease in the accounts receivable turnover figure, as customers would take longer to pay higher bills. Option D is incorrect because an increase in the accounts receivable balance would lead to a decrease in the accounts receivable turnover figure, as more accounts receivable would take longer to collect.

Which of the Following Statements Is True