Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio must also have a high payables-to-sales ratio.

Question

Quizplus · Accepted Answer

The receivables-to-sales ratio and payables-to-sales ratio are not directly correlated. A high receivables-to-sales ratio may indicate that a company is having difficulty collecting payments from customers, while a high payables-to-sales ratio may suggest that the company is taking longer to pay its own bills. Therefore, the two ratios are independent of each other and cannot be determined solely based on one another.

Since Receivables and Payables Both Result from Sales Transactions, a Firm