The ratio that provides an estimate of the number of days, on average, that it takes for customers to pay their account is the:
A)acid-test ratio.
B)accounts receivable turnover.
C)days' sales in receivables.
D)current ratio.

Question

Quizplus · Accepted Answer

The ratio that provides an estimate of the number of days, on average, that it takes for customers to pay their account is the Days' Sales in Receivables (DSR) ratio. It is calculated by dividing the accounts receivable by the average daily sales. This ratio helps companies to monitor their accounts receivable balance and effectively manage their cash flow. A lower DSR ratio indicates that customers are paying their accounts quicker and efficiently, whereas a high DSR ratio implies that the company is having difficulty collecting its receivables, which can have a negative impact on its overall financial health.

The Ratio That Provides an Estimate of the Number of Days