Which one of the following statements is true if a company's collection period for accounts receivable is unacceptably long?
A)The company may need to borrow to acquire operating cash.
B)The company may offer trade discounts to lengthen the collection period.
C)Cash flows from operations may be higher than expected for the company's sales.
D)The company should expand operations with its excess cash.

Question

Quizplus · Accepted Answer

An unacceptably long collection period for accounts receivable means that the company is not collecting its sales revenue in a timely manner, which can lead to a cash flow problem. The company may need to borrow money to acquire operating cash to cover expenses or invest in growth opportunities. Offering trade discounts or expanding operations are not appropriate solutions for this problem. Cash flows from operations may be higher than expected for the company's sales if the collection period is shorter than average, not longer.

Which One of the Following Statements Is True If a Company's