Which of the following statements is most likely correct for a firm with an average collection period of 90 days?
A)Its average daily sales are low
B)Its average daily sales are high
C)Its current ratio will be high
D)It is providing financing for approximately 25 percent of its annual sales

Question

Quizplus · Accepted Answer

A 90-day average collection period implies that the firm collects its receivables every 90 days, which is roughly a quarter of a year. Therefore, it is providing financing for approximately 25 percent of its annual sales.

Which of the Following Statements Is Most Likely Correct for a Firm