Days' Sales in Receivables Can Be Computed in Two Logical

question 55

Multiple Choice

Days' sales in receivables can be computed in two logical steps.In the second step:

• A)the collection period must be determined.
• B)the average daily sales are computed.
• C)the average daily sales are divided by the average net receivables.
• D)the average net receivables are divided by the average daily sales.

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Definitions:

Equity Multiplier

is a financial ratio indicating the proportion of the company’s assets financed by stockholders' equity, showing leverage.

Balance Sheet

A balance sheet that portrays a company's financial standing in terms of assets, liabilities, and the equity of its shareholders at a particular point.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, ending with the net income or loss for the period.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations by comparing its income before interest and taxes (EBIT) to its interest expenses.