For the most meaningful interpretation, the small business owner should compare his firm's average collection period to:
A) other businesses in the same geographic area.
B) a direct competitor.
C) the universal standard of 25 days.
D) the average for the industry and the firm's credit terms.

Question

Quizplus · Accepted Answer

To have the most meaningful interpretation, the small business owner should compare their firm's average collection period with the industry average and their firm's credit terms. This will help the owner to understand their firm's performance in comparison to the industry standard and determine if they need to make any changes to their credit policies. Comparing to other businesses in the same geographic area or a direct competitor might not provide an accurate picture of the industry standard or the firm's performance. The universal standard of 25 days might not be applicable to all industries or credit terms.

For the Most Meaningful Interpretation, the Small Business Owner Should