Which of the following actions can be taken to reduce the firm's average collection period?
A)Increase the firm's credit sales.
B)Decrease the firm's credit purchases.
C)More aggressively collect delinquent credit accounts.
D)Change the firm's inventory valuation method.
E)Revise the firm's capital budgeting investment policy.

Question

Quizplus · Accepted Answer

More aggressively collecting delinquent credit accounts will reduce the number of past due accounts and therefore decrease the average collection period. Increasing credit sales (Option A) might actually increase the average collection period as there will be more accounts to collect. Decreasing credit purchases (Option B) may have no impact on the average collection period. Changing inventory valuation method (Option D) and revising capital budgeting investment policy (Option E) are not relevant to reducing the average collection period.

Which of the Following Actions Can Be Taken to Reduce