Which of the Following Statements Best Describes Receivables Management

question 106

Multiple Choice

Which of the following statements best describes receivables management?

• A) A firm that makes 90% of its sales on credit and 10% for cash is growing at a constant rate of 10% annually. This firm will be able to keep its accounts receivable at the current level, since the 10% cash sales can be used to support the 10% growth rate.
• B) In managing a firm's accounts receivable, it is possible to increase credit sales per day yet still keep accounts receivable fairly steady, provided the firm can shorten the length of its collection period (its DSO).
• C) If a firm has a high percentage of accounts over 30 days old, this is a sure sign that the credit manager is not doing his or her job well.
• D) Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio must also have a high payables-to-sales ratio.

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Definitions:

Positive Constants

Fixed values greater than zero used in mathematical equations or expressions.

Payoffs

The returns or outcomes received from a particular action or investment.

Dominant Strategy Equilibrium

A situation in game theory where each participant's best strategy remains constant regardless of what strategies others choose.

Optimal Choice

The best possible selection from a set of alternatives, given constraints and objectives.