If the Debtors Turnover Ratio Changes from 45 Days to 40

question 53

Multiple Choice

If the debtors turnover ratio changes from 45 days to 40 days this indicates that:

• A)it is taking longer to collect money from trade debtors.
• B)the time taken to collect money from trade debtors is decreasing
• C)the time taken to sell inventory is increasing
• D)none of the options is correct

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Definitions:

Liquidity Ratios

Financial metrics used to assess a company's ability to meet its short-term obligations, indicating how quickly assets can be converted into cash.

Debt Ratio

A financial ratio that measures the extent of a company's leverage, calculated as the company's total liabilities divided by its total assets.

Total Debts

The sum of all financial obligations or liabilities owed by an individual, organization, or country.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or a business cycle, whichever is longer.