Which statement concerning the receivables turnover ratio is true?

Question

Quizplus · Accepted Answer

Receivables turnover ratio is a measure of how many times the average receivables balance is converted into cash during a year. Option A is incorrect because total sales are divided by the average accounts receivable balance to calculate the receivables turnover ratio. Option B is also incorrect because a decrease in the ratio indicates an unfavorable change, whereas an increase indicates a favorable change. Option D is incorrect because dividing the receivables turnover ratio by 365 provides the average collection period, not the average number of days it takes to sell receivables.

Which Statement Concerning the Receivables Turnover Ratio Is True