An Increase in the Accounts Receivable Turnover May Be Due

question 43

True/False

An increase in the accounts receivable turnover may be due to an improvement in the collection of receivables or to a change in the granting of credit and/or in collection practices.

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Definitions:

Acid-Test

A liquidity ratio that measures a company's ability to pay off its current liabilities with quick assets without relying on the sale of inventory.

Current Ratio

A financial ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.

Cash Discount

A reduction in the invoice price offered by sellers to buyers as an incentive for early payment.

Invoice Date

The date on which an invoice is issued, marking the beginning of the period in which payment is expected according to the terms of sale.