Allen Company's Average Collection Period for Accounts Receivable Was 40

question 37

Multiple Choice

Allen Company's average collection period for accounts receivable was 40 days last year,but increased to 60 days this year.Which of the following would most likely account for this change?

• A) A decrease in accounts receivable relative to sales.
• B) A decrease in sales.
• C) A relaxation of credit policies.
• D) An increase in sales.

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Definitions:

Basic Earnings

The net income earned by a company divided by the number of outstanding shares, providing a measure of the company’s profitability on a per-share basis.

Common Stock

A type of security that represents ownership in a corporation, granting shareholders voting rights and a share in the company's profits via dividends.

Stock Options

Financial instruments allowing the possessor to buy or sell shares at an agreed upon price before a certain deadline, without being compelled to do so.

Diluted Earnings

A measure of a company's profitability that accounts for all potential shares that could be issued, potentially lowering earnings per share.