Which one of the following statements is correct if a firm has an accounts receivable turnover measure of 10?
A)It takes the firm 36.5 days to pay its creditors.
B)It takes the firm 36.5 days to sell its inventory and collect payment from the sale.
C)It take the firm 36.5 days to collect payment for a sale.
D)The firm has ten times more in accounts receivable than it does in cash.
E)It takes an average of ten days to collect payment from the firm's customers.

Question

Quizplus · Accepted Answer

Accounts receivable turnover measures how quickly a firm can collect payment from its customers. If a firm has an accounts receivable turnover measure of 10, it means it takes the firm 36.5 days (365 days/year divided by 10) to collect payment for a sale. Therefore, choice C is correct.

Which One of the Following Statements Is Correct If a Firm