What Should a Company Do to Improve Its Accounts Receivable

question 22

Multiple Choice

What should a company do to improve its accounts receivable turnover ratio?

• A) Lower its selling prices.
• B) Increase its sales force.
• C) Give customers credit terms of 2/10, n/30 rather than 1/10, n/30.
• D) Reduce the number of employees working in the credit department.

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Definitions:

Debt-to-equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets, key in assessing financial leverage.

Assets

Resources owned by a business or individual that are expected to provide future economic benefits.

Equity

The value of an ownership interest in property or a business, after deducting liabilities from assets.

Return on Sales Ratio

A financial ratio that measures the efficiency of a company in generating operating profit from its revenue.