An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to:
A)decrease.
B)remain the same.
C)neither increase nor decrease.
D)increase.

Question

Quizplus · Accepted Answer

An acceleration in the collection of receivables means that the company is collecting its accounts receivable more quickly. This will increase the accounts receivable turnover ratio as the numerator (total credit sales) will remain the same but the denominator (average accounts receivable) will decrease. Therefore, the correct answer is D - increase.

An Acceleration in the Collection of Receivables Will Tend to Cause