Which one of the following statements is correct if a firm has an accounts receivable turnover measure of 10?
A)It takes the firm 36.5 days to pay its creditors.
B)It takes the firm 36.5 days to sell its inventory and collect payment from the sale.
C)It takes the firm 36.5 days to collect payment for a sale.
D)The firm has 10 times more in accounts receivable than it does in cash.
E)It takes an average of 10 days to collect payment from the firm's customers.

Question

Quizplus · Accepted Answer

An accounts receivable turnover measure of 10 indicates that the firm collects payment for a sale in an average of 36.5/10 = 3.65 days. Therefore, it takes the firm 3.65 days to collect payment for a sale (C) and not any of the other options.

Which One of the Following Statements Is Correct If a Firm