Which Statement Concerning the Receivables Turnover Ratio Is True

question 35

Multiple Choice

Which statement concerning the receivables turnover ratio is true?

• A) It is calculated as total sales divided by average receivables.
• B) A change in the ratio from 3.1 times to 2.8 times is a favourable change.
• C) If the receivables turnover ratio is divided into 365 this gives the average number of days it takes to sell receivables.
• D) It is a measure of how many times the average receivables balance is converted into cash in a year.

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Definitions:

Dividends

Money disbursed by a firm to its stock owners, often as a share of profits.

Noncumulative Preferred Stock

Type of preferred stock that does not give the holder the right to claim dividends missed in the past.

Preferred Dividends

Regular payments made to preferred shareholders out of the company's profits before any dividends are paid to common shareholders.

Weighted Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, assigning more weight to some numbers and less to others.