Question

A high accounts receivable turnover indicates__________.a. customers are making payments quicklyb. a large portion of the company's sales are on creditc. many customers are not paying their receiveablesd. the comapany's sales have increased

Answer 1

Answer:

A) Customers are making payments quickly.

Explanation:

Accounts receivable turnover analysis is a part of Working capital cycle, used to assess number of times a business is able to complete is business cycle in a given year. Working capital cycle include complete process of purchase of raw material, production process, sales, invoicing, recovery from customers and finally paying to creditors.

High receivable turnover indicates that the Company is recovering from customers earlier than its industry peers.

Companies are usually offering credit period to their customers according to market norms, a business / sales team is considered effective and efficient if they are able to secure payments with in the allowed credit period.

Answer 2

Answer:

Correct answer is (a) customers are making payments quickly

Explanation:

Accounts receivable turnover analysis is used to determine if a company is experiencing problem collecting the sales make on credit from the customers. A high receivables turnover ratio can indicate that a company's collection of accounts receivable is efficient and that the company has a high proportion of quality customers that pay their debts quickly