Asked by Debbie Annang on May 31, 2024
Verified
As the accounts receivable turnover ratio decreases, the average collection period increases.
Accounts Receivable Turnover Ratio
A financial ratio indicating how efficiently a company collects on owed credit sales over a period.
Average Collection Period
This term refers to the average number of days it takes for a business to receive payments from its customers for invoices issued.
- Carry out computations and assessments of several financial metrics, encompassing total asset turnover, inventory turnover, and accounts receivable turnover.
- Absorb the significance of transactions on the metrics of liquidity and efficiency, namely the acid-test ratio and the average duration of sales/collections.
Verified Answer
SB
Schlindlyne BellamourJun 01, 2024
Final Answer :
True
Explanation :
The accounts receivable turnover ratio is inversely related to the average collection period. A decrease in the ratio means that it takes more time to collect the accounts receivables, which results in an increase in the average collection period.
Learning Objectives
- Carry out computations and assessments of several financial metrics, encompassing total asset turnover, inventory turnover, and accounts receivable turnover.
- Absorb the significance of transactions on the metrics of liquidity and efficiency, namely the acid-test ratio and the average duration of sales/collections.
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