Which of the following ratios would be the best way to determine how customers are paying for their purchases?
A) Inventory turnover
B) Total asset turnover
C) Current ratio
D) Average collection period

Question

Quizplus · Accepted Answer

The Average Collection Period ratio would be the best way to determine how customers are paying for their purchases, as it measures the average number of days it takes for a business to collect its accounts receivable from customers. This can give insight into the payment habits of customers and the effectiveness of the company's credit and collection policies. Inventory turnover and Total asset turnover ratios are more focused on measuring efficiency and productivity, while the Current ratio is a measure of a company's ability to pay its short-term liabilities.

Which of the Following Ratios Would Be the Best Way