An efficient firm with good working capital management should have a high average collection period compared to that of its industry.

Question

Quizplus · Accepted Answer

An efficient firm with good working capital management should have a low average collection period as this indicates that they are able to collect payments from customers quickly, which improves cash flow and overall financial health. High average collection periods can signify delayed payments and potential difficulties in collecting payments, which can negatively impact cash flow and profitability. Therefore, a low average collection period is preferred in terms of efficient working capital management.

An Efficient Firm with Good Working Capital Management Should Have