Deegan Industries has an accounts receivable turnover rate of 8.Which of the following statements is not true?
A)Deegan's accounts receivable are more liquid than those of a business whose accounts receivable turnover rate is 5.
B)Deegan waits approximately 46 days to make collections of its credit sales.(Use 365 days in a year. )
C)Deegan writes off accounts receivable as uncollectible if they are over 45 days old.
D)Deegan's net credit sales are about eight times the amount of its average accounts receivable.

Question

Quizplus · Accepted Answer

If Deegan writes off accounts receivable as uncollectible if they are over 45 days old, it implies that their average collection period is less than or equal to 45 days (since they write off accounts older than 45 days). Therefore, statement B cannot be true, as it suggests that Deegan waits approximately 46 days to make collections of its credit sales. Statements A and D are true based on the given information.

Deegan Industries Has an Accounts Receivable Turnover Rate of 8