Bank of Royal's credit manager, Massimo Rozzi is interested in assessing the efficiency, profitability and liquidity of Spherion PLC.Rozzi has collected the following data for Spherion: $\begin{array}{llll}&2015&2014&2013\
\text { Days of sales outstanding } & 28 & 25 & 23 \
\text { Days of inventory on hand } & 32 & 34 & 40 \
\text { Number of days of payables } & 40 & 35 & 35
\end{array}$ Based on this data, what is Rozzi least likely to conclude?
A)Management is aggressively recognizing revenues.
B)Inventory management has contributed to improved liquidity.
C)Management of payables has contributed to improved liquidity.
D)Management of receivables has contributed to improved liquidity.

Question

Quizplus · Accepted Answer

The increase in days of sales outstanding from 23 days in 2013 to 28 days in 2015 suggests that management is taking longer to collect receivables, which contradicts the notion of aggressively recognizing revenues. Instead, it indicates a potential slowdown in collecting cash from sales, which could be a concern for liquidity rather than an indication of aggressive revenue recognition.

Bank of Royal's Credit Manager, Massimo Rozzi Is Interested in Assessing