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:

Average cost method

An inventory costing method where all costs of inventory are averaged out to determine the cost of goods sold and the ending inventory value.

Cost of merchandise sold

The entire expense directly tied to the production and sale of products in inventory that were sold during a specific period.

Year amount

An expression referring to the total amount or figures calculated over a year's period.

Average cost method

An inventory costing method where the cost of goods sold and ending inventory is calculated based on the average cost of all units available for sale during the period.