The Number of Times a Company Collects the Average Accounts

question 86

True/False

The number of times a company collects the average accounts receivable balance in a year is known as the accounts receivable turnover ratio.

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Definitions:

Credit Sales

Sales made by a business allowing the customer to pay at a later date, often tracked through accounts receivable.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations using its current assets.

Short-Term Note Payable

A debt obligation due within one year or within the normal operating cycle of the business, used to finance short-term financing needs.

Receivables Turnover Ratio

A financial metric used to assess how efficiently a company collects cash from its credit sales by dividing total credit sales by the average accounts receivable.