Final answer:
The statement is true as a higher number of days to collect receivables can lead to tied-up cash flow, increased risk of bad debts, and additional financing costs, all of which can contribute to lost income.
Step-by-step explanation:
The statement that 'the higher the number of days to collect receivables, the greater the chance of lost income' is generally true. This concept is related to the accounts receivable turnover ratio, which measures how efficiently a company can collect on the credit it extends to customers. A higher number indicates that it is taking longer for a company to collect its receivables. This can have several negative implications: it may tie up a company's cash flows, increasing the risk of bad debts, and potentially leading to additional financing costs if the company must find alternative sources of cash to fund its operations.
Therefore, efficient management of accounts receivable is crucial to maintaining healthy cash flow and minimizing the risk of lost income.The statement is True. The number of days to collect receivables refers to the average time it takes for a company to collect payments for goods or services it has provided. The longer it takes for a company to collect its receivables, the greater the chance of lost income.For example, if a company has a high number of days to collect receivables, it may indicate that customers are delaying their payments, which can result in cash flow problems for the company. Additionally, the longer it takes to collect receivables, the more time there is for customers to experience financial difficulties or go out of business, increasing the risk of lost income.