The following selected information is from Acme's annual report for the years ended December 31:

-Refer to the Acme annual report above.Which of the following statements is TRUE about the accounts receivable turnover ratios for 2011 and 2012?
A)The ratio is higher in 2012.This means management is doing a better job of collecting accounts receivable in 2012.
B)The ratio is higher in 2012.This means management is doing a worse job of collecting accounts receivable in 2012.
C)The ratio is lower in 2012.This means management is doing a better job of collecting accounts receivable in 2012.
D)The ratio is lower in 2012.This means management is doing a worse job of collecting accounts receivable in 2012.

Question

The following selected information is from Acme's annual report for the years ended December 31:

-Refer to the Acme annual report above.Which of the following statements is TRUE about the accounts receivable turnover ratios for 2011 and 2012?
A)The ratio is higher in 2012.This means management is doing a better job of collecting accounts receivable in 2012. 
B)The ratio is higher in 2012.This means management is doing a worse job of collecting accounts receivable in 2012. 
C)The ratio is lower in 2012.This means management is doing a better job of collecting accounts receivable in 2012. 
D)The ratio is lower in 2012.This means management is doing a worse job of collecting accounts receivable in 2012.

Quizplus · Accepted Answer

The accounts receivable turnover ratio is calculated by dividing net sales by average accounts receivable. A higher ratio indicates that the company is collecting its accounts receivable more quickly, while a lower ratio indicates that the company is collecting its accounts receivable more slowly. In this case, the accounts receivable turnover ratio is lower in 2012 compared to 2011, which means that management is doing a worse job of collecting accounts receivable in 2012. Therefore, the correct answer is D.

The Following Selected Information Is from Acme's Annual Report for the Years