If the average collection period or days sales outstanding is increasing the firm should consider easing its credit policy to allow credit to more of its customers.

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If the average collection period or days sales outstanding is increasing, it indicates that customers are taking longer to pay their debts. This can result in a cash flow problem for the firm. To improve the situation, the firm should consider tightening its credit policy to ensure that credit is only extended to customers who are likely to pay on time. Easing the credit policy would only exacerbate the problem by allowing customers who are already slow to pay to take even longer to do so.

If the Average Collection Period or Days Sales Outstanding Is