Which of the following is not a valid quantitative measure of accounts receivable collection policies?
A) average collection period
B) aging of accounts receivables
C) ratio of debt to equity
D) ratio of bad debts to credit sales

Question

Quizplus · Accepted Answer

Ratio of debt to equity is not a valid quantitative measure of accounts receivable collection policies, as it is a measure of a company's overall financial leverage and not specific to its collection policies. The other options listed are valid measures: 
- Average collection period measures the average number of days it takes a company to collect payments from its customers after a sale is made. 
- Aging of accounts receivable categorizes outstanding receivables by the length of time they have been outstanding, allowing a company to identify and address collection issues. 
- Ratio of bad debts to credit sales measures the proportion of credit sales that ultimately result in uncollectible bad debts.

Which of the Following Is Not a Valid Quantitative Measure