Which of the following statements is most likely correct for a firm with an average collection period of 90 days?
A) Its average daily sales are low.
B) Its average daily sales are high.
C) Its current ratio will be high.
D) It is providing financing for approximately 25% of its annual sales.

Question

Quizplus · Accepted Answer

A 90-day average collection period suggests that the firm is allowing customers to take about 90 days to pay their invoices. This period represents approximately 25% of a year (90/365), indicating that the firm is providing financing for about 25% of its annual sales.

Which of the Following Statements Is Most Likely Correct for a Firm