Question

The accounts receivable turnover rate: Multiple Choice Indicates how many times the receivables were converted into cash during the year. Is computed by dividing average receivables by sales. Indicates the average number of days a business waits to make collection on a credit sale. Indicates the proportion of a company's accounts receivable that the independent auditors were unable to confirm.

Answer 1

Answer:

Indicates how many times the receivables were converted into cash during the year.

Explanation:

Accounts receivables turnover ratio or Debtor Turnover Ratio(DTR) depicts the number of times a business's receivables are converted into cash within a period.

The ratio is computed as follows:

$\frac{Net\ Credit\ Sales}{Average\ Accounts\ Receivables}$

wherein, Average Accounts Receivables = $\frac{Op.\ debtor\ balance\ +\ Cl.\ debtor\ balance}{2}$

wherein, Op. = Opening

               Cl. = Closing

The ratio depicts how often a firm receives the money due from it's debtors during a period and represents how frequently debtors make payments, represented by average collection period which is computed as follows:

= $\frac{365\ days}{DTR}$