XYZ CorpHas Improved Its Average Collection Period from 55 to 40

question 120

Multiple Choice

XYZ Corp.has improved its average collection period from 55 to 40 days.Which one of XYZ are other ratios may appear worse as a result of the improved receivables collection?

• A)Inventory turnover
• B)Quick ratio
• C)Net profit margin
• D)Return on equity

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Definitions:

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used to assess the profitability of an investment or project.

Discount Rate

The interest rate used in discounted cash flow analysis to determine the present value of future cash flows.

Time Value of Money

The concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

Cash Flows

The inflows and outflows of cash for a business, representing the movement of money into and out of the organization.