The Accounts Receivable Turnover Ratio Is Computed by Dividing Net

question 56

True/False

The accounts receivable turnover ratio is computed by dividing net income by average accounts receivable.

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Definitions:

Direct Materials Purchased

This involves the acquisition of raw materials that are directly used in the manufacturing of a product, constituting a significant portion of the production cost.

Accounts Receivable

Amounts due to a firm from its customers for delivered services or products that remain unpaid.

Factory Overhead

Refers to the indirect manufacturing costs that are not directly tied to the production of goods, such as utilities, maintenance, and rent of the factory building.

Direct Labor Costs

Expenses related to the wages of employees who are directly involved in the production of goods or delivery of services.