The receivables turnover ratio provides a way for an analyst to assess the effectiveness of a company in managing its investment in receivables.

Question

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The statement is true. The receivables turnover ratio is calculated by dividing net credit sales by the average accounts receivable during a certain period. This ratio helps analysts evaluate how quickly a company is collecting its receivables from customers and clients. A higher receivables turnover ratio indicates that the company is managing its receivables effectively and is collecting outstanding invoices in a timely manner.

The Receivables Turnover Ratio Provides a Way for an Analyst