Final answer:
When cash is collected on account from a customer, it would affect both the debt-to-assets ratio and the asset turnover ratio.
Step-by-step explanation:
When cash is collected on account from a customer, it would affect both the debt-to-assets ratio and the asset turnover ratio.
1. The debt-to-assets ratio is a measure of a company's financial leverage and indicates the proportion of its assets financed by debt. When cash is collected from a customer, it reduces the accounts receivable balance (which represents the amount owed by customers), resulting in a decrease in total liabilities. As a result, the debt-to-assets ratio decreases since the debt component decreases while the assets remain unchanged.
2. The asset turnover ratio measures a company's efficiency in using its assets to generate revenue. When cash is collected from a customer, it increases the cash balance and has no direct impact on the asset turnover ratio. However, if the collected cash is used to purchase additional assets or invest in the business, it could indirectly affect the asset turnover ratio by influencing the company's revenue generation capacity.