An Unusually High Turnover of Accounts Receivable,which Implies a Very

question 61

Multiple Choice

An unusually high turnover of accounts receivable,which implies a very short days sales outstanding (DSO) ,could indicate that the firm

• A) Is very conservative (tough)in its credit policy.
• B) Has a very efficient credit and collection department.
• C) Offers unusually large discounts.
• D) All of the above.
• E) Only answers a and b above.

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Definitions:

Quantity Discounts

Price reductions offered to buyers who purchase in bulk or exceed specified quantities, incentivizing larger orders.

Cycle Counting

An inventory auditing procedure where a small subset of inventory, in a specific location, is counted on a specified day.

Cyclical Items

Goods or services whose demand fluctuates in a predictable pattern over time due to seasonal, economic, or other cyclic factors.

ABC Analysis

A methodology for classifying inventory items based on their importance, where A items are most valuable, followed by B and then C, to prioritize inventory management efforts.