During the year, Caltech Inc.'s accounts receivable turnover rate increased from 10 to 12 times. The company makes credit sales only with credit terms of 3/10, n/40. The best explanation for the increase is that
A) the company's credit department did a better follow up with customers whose account balances became past due.
B) the company has recently dropped its credit check policy.
C) the company makes all customers pay cash instead of allowing purchases to be charged.
D) the company has more customers at the end of the year than it had at the beginning of the year.

Question

Quizplus · Accepted Answer

The increase in accounts receivable turnover rate suggests that the company is collecting its receivables more quickly. This is likely due to better follow-up with customers whose account balances became past due, improving collection efficiency.

During the Year, Caltech Inc