Question

which information regarding the receivables turnover ratio is true? multiple select question. it shows the number of days it takes to collect accounts receivable. the lower the ratio, the better the company is performing. it shows the number of times during a period that the average accounts receivable balance is collected. it provides an indication of a company's efficiency in collecting receivables.

Answer 1

The receivables turnover ratio measures a company's efficiency in collecting its receivables and is calculated by dividing the net credit sales by the average accounts receivable. A higher ratio suggests better performance and efficiency.

Step-by-step explanation:

The receivables turnover ratio is a measure used in accounting to assess the effectiveness of a company in extending credit and collecting debts. It is calculated by dividing the company's net credit sales by its average accounts receivable, which shows the number of times a company collects its average accounts receivable balance during a period.

Therefore, the true statements about the receivables turnover ratio are:

It shows the number of times during a period that the average accounts receivable balance is collected.

It provides an indication of a company's efficiency in collecting receivables.

Contrary to one of the options, a higher receivables turnover ratio is generally seen as more favorable since it indicates that the company is collecting its receivables more frequently.