The Days- To- Collect Increases from 32 to 48

question 96

Multiple Choice

The days- to- collect increases from 32 to 48.Which of the following statements is true?

• A)The company is likely to see its bad debt expense fall.
• B)The receivables turnover rate rises by 50%.
• C)The company is becoming more efficient at collecting payment.
• D)The receivables turnover rate falls from approximately 11.4 to 7.6.

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Definitions:

Payback Period

The length of time required to recover the initial cost of an investment, highlighting the investment's risk and liquidity.

Modified Internal Rate

A version of the Internal Rate of Return (IRR) calculation that adjusts for changes in cash flows over the project's life, offering a more nuanced evaluation of profitability.

Discounting Approach

A financial strategy that determines the present value of future cash flows by applying a discount rate.

Discount Rate

It’s the interest rate used in the process of discounted cash flow analysis to evaluate the present value of anticipated future cash flows.