Two Important Ratios That Help in Understanding the Company's Effectiveness

question 6

True/False

Two important ratios that help in understanding the company's effectiveness in managing receivables are the receivables turnover ratio and the average collection period.

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Definitions:

Financing Activities

Transactions involving obtaining or repaying capital and funds used to finance the company's operations and expansions.

Issuance

The process of making securities available for sale to the public or the act of issuing new shares of stock by a company.

Cash Flows

The total amount of money being transferred into and out of a business, especially as it affects liquidity.

Investing Activities

Financial transactions involving the purchase or sale of long-term assets and investments, a component of cash flow statements.