Dividing accounts receivable by net sales and multiplying the result by 365 is equal to the:
A)Profit margin.
B)Days' sales uncollected.
C)Accounts receivable turnover ratio.
D)Average accounts receivable ratio.
E)Current ratio.

Question

Quizplus · Accepted Answer

Dividing accounts receivable by net sales gives the accounts receivable turnover ratio. Multiplying the result by 365 gives the days' sales uncollected, which represents the average number of days it takes to collect the accounts receivable.

Dividing Accounts Receivable by Net Sales and Multiplying the Result