Which of the Following Statements Regarding the Receivables Turnover Ratio

question 32

Multiple Choice

Which of the following statements regarding the receivables turnover ratio is true?

• A) The receivables turnover ratio indicates how many times, on average, the process of selling to and collecting from customers occurs during the accounting period.
• B) Companies of similar size operating in the same country tend to have similar receivables turnover ratios.
• C) A high turnover ratio may suggest the company is allowing too much time for customers to pay.
• D) The receivables turnover ratio is used to calculate the days to collect by dividing the turnover ratio by 365

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Definitions:

Effective-interest Amortization

A method of amortizing the premium or discount on bonds payable that reflects the periodic interest expense based on the bond's carrying value.

Interest Expense

Expenses related to the borrowing of money by an entity during a certain period.

Issue Price

The price at which a new issue of securities is offered to the public.

Straight-line Method

A method of calculating depreciation or amortization by evenly spreading the cost of an asset over its useful life.