Use the information above to answer the following question.If the company changes its credit granting policies and begins granting credit to less creditworthy customers,which of the following statements is true regarding the likely effect on the receivables turnover ratio and the days to collect measure?
A)The receivables turnover ratio will decrease and days to collect will increase.
B)The receivables turnover ratio will increase and days to collect will increase.
C)The receivables turnover ratio will decrease and days to collect will decrease.
D)The receivables turnover ratio will not change and days to collect will decrease.

Question

Quizplus · Accepted Answer

If the company begins granting credit to less creditworthy customers, it is likely that the receivables turnover ratio will decrease because it will take longer to collect the outstanding receivables. Additionally, the days to collect measure will also increase, as it will take longer to collect the outstanding receivables. Therefore, answer choice A is correct.

Use the Information Above to Answer the Following Question