What Is the Effect of an Unacceptably Long Collection Period

question 64

Multiple Choice

What is the effect of an unacceptably long collection period for accounts receivable?

• A) The collection cost will be reduced.
• B) The company may offer sales discounts to shorten the collection period.
• C) Cash flows from operations may be higher than expected for the company's sales.
• D) The company should expand operations with its excess cash.

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Definitions:

Discretionary Income

The amount of an individual's income left for spending, investing, or saving after all taxes and necessities have been paid.

Luxury Items

High-end products or services that are not essential but are desired for their quality, status, and aesthetic appeal, often associated with a higher price.

Voyage

A long journey involving travel, especially by sea or in space.

Applied Science

A discipline that applies existing scientific knowledge to develop more practical applications, including technology or inventions, within fields such as engineering and medicine.