Allen Company's average collection period for accounts receivable was 40 days last year, but increased to 60 days this year. Which of the following would most likely account for this change?
A) a decrease in accounts receivable relative to sales.
B) a decrease in sales.
C) a relaxation of credit policies.
D) an increase in sales.

Question

Quizplus · Accepted Answer

A relaxation of credit policies would allow customers more time to pay their bills, which could result in a longer average collection period for accounts receivable. The other options would not necessarily lead to a longer average collection period.

Allen Company's Average Collection Period for Accounts Receivable Was 40