Which of the Following Situations Is Most Likely to Explain

question 71

Multiple Choice

Which of the following situations is most likely to explain an accounts receivable turnover that is lower than the industry norm?

• A)The company makes less credit sales than industry.
• B)The company gives customers less time to pay than its competitors.
• C)The company has been selling inferior products to competitors.
• D)The company is systematically under-estimating bad debts.

---

Definitions:

Gross Profit Rate

A financial metric that shows the proportion of money left from revenues after accounting for the cost of goods sold.

Rate of Return on Total Assets

A financial ratio that measures the efficiency of a company's use of its assets in generating profit, calculated by dividing net income by total assets.

Rate of Return on Common Stockholders' Equity

A measure of the profitability relative to the shareholders' equity, demonstrating how efficiently equity is used to generate profits.