The ratio that is used to assess the liquidity of accounts receivable is the
A) current ratio.
B) receivables turnover ratio.
C) quick ratio.
D) inventory turnover ratio.

Question

Quizplus · Accepted Answer

The receivables turnover ratio is used to assess the liquidity of accounts receivable by indicating how quickly a company collects its outstanding receivables. It is calculated as net credit sales divided by average accounts receivable. A higher ratio indicates that the company is collecting its receivables more quickly and efficiently, while a lower ratio suggests that the company may have difficulty collecting its outstanding debts. The other ratios listed are not specifically designed to assess the liquidity of accounts receivable.

The Ratio That Is Used to Assess the Liquidity of Accounts