How Is the Accounts Receivable Turnover Ratio Computed

question 48

Multiple Choice

How is the accounts receivable turnover ratio computed?

• A)Sales ÷ Net accounts receivable
• B)Net accounts receivable ÷ Sales
• C)Cost of goods sold ÷ Inventory
• D)365 days ÷ Net accounts receivable

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Definitions:

Effective Interest Method

A method of calculating the interest revenue for an investment where the interest rate is compounded with each period.

Present Value

The present monetary value of a future sum or a series of cash payments, considering a designated rate of return.

Actuarial Information

Actuarial information involves data and analysis related to assessing financial risks in insurance and finance, especially calculations concerning premiums or pension obligations.

Interest Expense

The cost incurred by an entity for borrowed funds, which is charged as an expense on the income statement over the period the funds are borrowed.