A high accounts receivable turnover ratio indicates
A) Customers are making payments quickly
B) A large portion of the company's sales are on credit
C) Many customers are not paying their receivables in a timely manner
D) The company's sales have increased

Question

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A high accounts receivable turnover ratio indicates that customers are making payments quickly, which is a good sign for the company as it means they can quickly convert their receivables into cash. A low ratio, on the other hand, indicates that many customers are not paying their receivables in a timely manner, which can cause cash flow problems for the company. The ratio is calculated by dividing the net credit sales by the average accounts receivable balance.

A High Accounts Receivable Turnover Ratio Indicates