Which of the Following Statements Is NOT True Regarding Accounts

question 40

Multiple Choice

Which of the following statements is NOT true regarding accounts receivable turnover?

• A)In general, the higher the ratio, the better.
• B)If the accounts receivable turnover ratio is too high, this may indicate that credit is too tight and the company may be losing sales to good customers.
• C)Accounts receivable turnover is computed by dividing net sales by end of the year receivables.
• D)Accounts receivable turnover is computed by dividing net sales by average accounts receivable.

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Definitions:

Cash Discount

An incentive offered for the early payment of an invoice or bill, reducing the amount owed.

Complement Rate

The percentage subtracted from 100% to find the remaining portion of a rate, often used in insurance and finance to determine net rates.

Discount Date

The date on which a bill of exchange or other payment instrument is discounted, meaning it is computed for present value before its maturity date.

Freight Charge

A fee charged for the transportation of goods by freight services, often based on the weight and distance.