Which of the Following Is Most Likely to Indicate That

question 23

Multiple Choice

Which of the following is most likely to indicate that a firm is experiencing difficulty in collecting its receivables?

• A)Its average collection period decreases from 36 to 32.
• B)Its accounts receivable turnover increases from 8 to 10.
• C)Its accounts receivable turnover decreases from 10 to 8.
• D)The bad debt reserve decreases by 10%.

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Definitions:

Discount Rate

The discount rate applied in the evaluation of the present value of future cash flows in discounted cash flow analysis.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Cash Inflows

The total amount of money being received by a company, usually from its operations, investments, or financings.

Depreciation Expense

Refers to the allocation of the cost of a tangible asset over its useful life.