The statement concerning the receivables turnover ratio that is true is:

Question

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The receivables turnover ratio is a measure of how many times the average receivables balance is converted into cash in a year. Option A is incorrect as it calculates the formula for the ratio incorrectly. Option B is also incorrect as an increase in the ratio from 2.8 to 3.1 times would indicate a favorable change as it shows that the company is collecting its receivables more quickly. Option D is also incorrect as dividing the receivables turnover ratio by 365 gives the average collection period, not the number of days it takes to sell receivables.

The Statement Concerning the Receivables Turnover Ratio That Is True