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Indicate Whether Each of the Following Statements Is True or False

Question 41

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Indicate whether each of the following statements is true or false.

Premises:
The higher the accounts receivable turnover ratio,the longer is a company's cash collection period.
The average days to collect accounts receivable is measured as 365 divided by the accounts receivable turnover ratio.
The accounts receivable turnover ratio is measured as the amount of sales divided by accounts receivable.
A higher average collection period is desirable.
Longer collection periods decrease the costs of collecting from customers.
Responses:
False
True

Correct Answer:

The higher the accounts receivable turnover ratio,the longer is a company's cash collection period.
The average days to collect accounts receivable is measured as 365 divided by the accounts receivable turnover ratio.
The accounts receivable turnover ratio is measured as the amount of sales divided by accounts receivable.
A higher average collection period is desirable.
Longer collection periods decrease the costs of collecting from customers.
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