A company wishes to assess certain financial performance measures to assess their operations for the current year. Management believes this will be an effective way to assess certain aspects as the financial measures are both objective and measurable. If the organization would like to evaluate how effective the organization is at collecting receivables, then which of the following performance measures should they use?
A) Accounts receivable turnover
B) Net income growth
C) Gross margin
D) Operating cash flow

Question

Quizplus · Accepted Answer

This question requires familiarity with financial performance measures and how to best use them. Choice A is the correct choice since that will directly measure the company's effectiveness at collecting receivables, unlike choice B that measures the number of days it takes to collect them rather than the efficiency. The other two choices are financial performance measures, but they do not measure the efficiency of collecting receivables.

A Company Wishes to Assess Certain Financial Performance Measures to Assess