In 2012, C Co's receivables turnover ratio and days' sales in receivables was 11.43 times and 31.9 days. In 2012, P Co's receivables turnover ratio and days' sales in receivables was 9.71 times and 37.6 days. Which of the following statements is false?
A) P Co's lower turnover ratio has an inverse relationship to its days' sales tied up in receivables.
B) C Co's management has done a better job of managing their receivables.
C) C Co appears to be more profitable than P Co.
D) The higher turnover ratio for C Co hurts their liquidity.

Question

Quizplus · Accepted Answer

The receivables turnover ratio and days' sales in receivables do not directly indicate profitability. They only show how quickly a company is collecting payments from its customers. Therefore, statement C is false. Statements A, B, and D are all true based on the given information.

In 2012, C Co's Receivables Turnover Ratio and Days' Sales