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A HIGH receivable turnover ratio indicates A) customers are making payments very quickly. B)customers are making...

A HIGH receivable turnover ratio indicates

A) customers are making payments very quickly.

B)customers are making payments slowly.

C)the company's sales are increasing.

D) the company should go out of business.

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Answer #1

Answer: Option ( A ) Customers are making payments very quickly.

Explanation:

Accounts receivable turn over ratio is used to calculate how many times amount is collected up on the goods sold on credit. As this ratio is high it assumes that the company is good at collecting payments. So if this ratio is high it can be assume that customers are making payment very quickly.

Formula: Accounts receivable turnover ratio = Net Sales / Average accounts receivable.

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