Efficient collection of accounts receivable helps to determine both the profitability and the liquidity of the firm.

Question

Quizplus · Accepted Answer

Efficient collection of accounts receivable ensures that the firm has enough cash inflow to meet its short-term obligations and operating expenses. This, in turn, determines the liquidity of the firm. Additionally, timely collection of payment also reduces the risk of bad debt and increases the profitability of the firm. Therefore, the statement is true.

Efficient Collection of Accounts Receivable Helps to Determine Both the Profitability