XYZ Corp.has improved its average collection period from 55 to 40 days.Which one of XYZ's other ratios may appear worse as a result of the improved receivables collection?
A) Inventory turnover
B) Quick ratio
C) Net profit margin
D) Return on equity

Question

Quizplus · Accepted Answer

The quick ratio may appear worse because it includes accounts receivable in the numerator. Faster collection reduces accounts receivable, potentially lowering the quick ratio.

XYZ CorpHas Improved Its Average Collection Period from 55 to 40