If the days debtors ratio changes from 32 days to 38 days this indicates that:
A) the entity is becoming more efficient at collecting money from trade debtors.
B) the time taken to collect money from trade debtors is increasing.
C) the time taken to sell inventory is increasing.
D) the time taken to pay suppliers of inventory is increasing.

Question

Quizplus · Accepted Answer

The days debtors ratio is a measure of how long it takes for a business to collect payment from its customers (trade debtors). An increase in this ratio means that the time taken to collect payment is increasing, indicating a possible issue with collections efficiency or credit management. Therefore, option B is the correct answer.

If the Days Debtors Ratio Changes from 32 Days to 38