All of the Following Statements Are true Regarding the Average

question 163

Multiple Choice

All of the following statements are true regarding the average collection period except:

• A)it is a popular variant of the accounts receivable turnover.
• B)it is used to assess the effectiveness of a company's credit and collection policies.
• C)it should generally exceed the credit term period.
• D)its increase may suggest a decline in the financial health of customers.

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Definitions:

Differential Income

The difference in income between two alternatives, used in decision-making processes to determine the best option.

Alternative Use

Refers to the potential other uses or applications of an asset or resource outside its current employment.

Variable Cost

Costs that vary directly with the level of production or sales volume.

Total Costs

The complete aggregate of expenses incurred by a business, encompassing both fixed and variable costs.