When decision-makers want to know how well a firm manages the amounts owed to them by customers as compared to other firm's,they should use
A)current ratio
B)asset turnover
C)cash flow per share
D)average collection period

Question

Quizplus · Accepted Answer

The average collection period measures the time it takes for a company to collect payments from its customers, which is an important indicator of how well a firm manages its accounts receivables. It is calculated by dividing the accounts receivable by the average daily credit sales, and is expressed in days. A lower average collection period indicates that a firm is collecting payments from its customers more quickly and efficiently, which can improve cash flow and profitability. Therefore, decision-makers who want to evaluate a firm's accounts receivable management should use the average collection period metric.

When Decision-Makers Want to Know How Well a Firm Manages