If You Were Given the Average Collection Period of a Firm

question 34

Multiple Choice

If you were given the average collection period of a firm was currently 45 days, that the average collection of the firm for the past 3 years was 30 days and that the average collection period of the firm's industry for the past few years and currently was 30 days, would you want to know any other information to evaluate the effectiveness of the firm's credit and collection policies?

• A) No, the firm obviously has a problem with its credit and collection policies.
• B) Yes, you would also want to know what the firm's credit terms are and especially if they had recently changed from 30 to 45 days.
• C) No, the firm does not seem to have any issues with its credit and collection policies.
• D) Yes, you would want to know what the average collection period was for the past few years and currently of the market in general.

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Definitions:

Walking Purchase

A controversial 1737 agreement where Pennsylvania colonists claimed land from the Delaware Indians by walking the perimeter in a fixed time, exploiting the deal unjustly.

Fraudulent Practices

Actions intended to deceive others for personal gain or advantage, often violating legal or ethical standards.

Iroquois

A historically powerful and important northeast Native American confederacy, known as the Haudenosaunee, consisting of six nations: the Mohawk, Onondaga, Oneida, Cayuga, Seneca, and Tuscarora tribes.

William Penn

An English Quaker leader and founder of Pennsylvania, a colony established as a place of religious freedom for Quakers and other persecuted religions.