During 2016, the accounts receivable turnover rate for Cordner Company increased from 10 to 14 times per year.Which one of the following statements is the most likely explanation for the change?
A) The company's credit department has followed up with customers whose account balances are past due in order to generate quicker collections.
B) The company has decreased sales to its most credit worthy customers.
C) The company has increased the amount of time customers have to pay their accounts before they are past due.
D) The company has extended credit to more risky customers in order to increase sales.

Question

Quizplus · Accepted Answer

The increase in accounts receivable turnover rate indicates that the company is collecting its outstanding debts more quickly. It is likely that the credit department has taken steps to follow up with customers whose account balances are past due in order to generate quicker collections.

During 2016, the Accounts Receivable Turnover Rate for Cordner Company