Which Ratio Indicates the Effectiveness of a Company's Credit Extension

question 92

Multiple Choice

Which ratio indicates the effectiveness of a company's credit extension policy?

• A) inventory turnover
• B) accounts payable turnover
• C) days sales outstanding
• D) days inventory on hand

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Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, with holders possibly entitled to vote on corporate matters and receive dividends.

Equipment

Tangible assets used in operations, such as machinery, computers, and furniture, which are expected to be used over several years.

Note Payable

A written promise to pay a specific sum of money on a future date or dates, typically with interest.

Journal Entry

A record in accounting that notes the debit and credit effects of a financial transaction.