In 20X2, C Co's receivables turnover ratio and days' sales in receivables was 11.43 times and 31.9 days. In 20X2, 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) The higher turnover ratio for C Co hurts their liquidity.
B) P Co's lower turnover ratio has an inverse relationship to its days' sales tied up in receivables.
C) C Co's management has done a better job of managing their receivables.
D) C Co appears to be more proﬁtable than P Co.

Question

Quizplus · Accepted Answer

The receivables turnover ratio and days' sales in receivables provide insights into how efficiently a company manages its receivables, not directly about profitability. C Co's higher turnover ratio indicates better receivables management, but it doesn't necessarily mean C Co is more profitable than P Co.

In 20X2, C Co's Receivables Turnover Ratio and Days' Sales