The accounts receivable turnover ratio is calculated by dividing:
A) average credit sales by ending accounts receivable.
B) average inventory by beginning accounts receivable.
C) net sales by average accounts receivable.
D) net profit by total accounts receivable.

Question

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The accounts receivable turnover ratio is calculated by dividing net sales by average accounts receivable. This ratio measures how many times a company's accounts receivable is turned over during a particular period of time, typically a year. It helps to evaluate the effectiveness of a company's credit and collection policies. A higher ratio indicates that a company is able to collect its receivables quickly, while a lower ratio suggests that the collection period is longer. Choices A, B, and D are incorrect because they do not involve the use of net sales or average accounts receivable in the calculation.

The Accounts Receivable Turnover Ratio Is Calculated by Dividing