For the most meaningful interpretation, the small business owner should compare her/his firm's average collection period to ________.
A)other businesses in the same geographic area
B)a direct competitor
C)the universal standard of 25 days
D)the average for the industry and the firm's credit terms

Question

Quizplus · Accepted Answer

Comparing the small business owner's firm's average collection period to the industry average and the firm's credit terms would provide the most meaningful interpretation. This would allow the owner to see how their collection period compares to competitors and the overall industry, as well as whether their credit terms are effective in reducing the collection period. Comparing to other businesses in the same geographical area or a single direct competitor may not provide a representative sample for comparison. The universal standard of 25 days may not be applicable or relevant to the owner's specific industry or business model.

For the Most Meaningful Interpretation, the Small Business Owner Should