Question

To best interpret the accounts receivable turnover ratio, the days in accounts receivable should be compared to the company's:_____

Answer 1

To best interpret the accounts receivable turnover ratio, the days in accounts receivable should be compared to the company's credit terms or average collection period.

Step-by-step explanation:

To best interpret the accounts receivable turnover ratio, the days in accounts receivable should be compared to the company's credit terms or average collection period. The accounts receivable turnover ratio measures how quickly a company collects its outstanding accounts receivable. By comparing the days in accounts receivable to the credit terms or average collection period, we can assess if the company is effectively managing its accounts receivable and if it is collecting payments from customers within a reasonable timeframe.