Question

The accounts receivable turnover measures a.the number of days of accounts receivable outstanding b.the fair market value of accounts receivable c.the efficiency of the accounts payable function d.how frequently during the year the accounts receivable are converted to cash

Answer 1

The accounts receivable turnover measures the frequency at which a company converts its receivables to cash during a year, reflecting its collection efficiency.

Step-by-step explanation:

The accounts receivable turnover is a financial ratio that measures how frequently during the year the accounts receivable are converted to cash. This is indicative of the company's effectiveness in collecting its outstanding credit sales. To calculate the turnover, you divide the net credit sales by the average accounts receivable during the period. Here's the formula:

Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable

The result tells us how many times the company has collected its average receivables. A higher turnover ratio indicates a quicker collection period and thus a more efficient credit sales collection process.

Answer 2

d.how frequently during the year the accounts receivable are converted to cash

Step-by-step explanation:

The formula to compute the account receivable turnover is shown below:

Account receivable turnover ratio = Net credit sales ÷ Average accounts receivable

where,

The Average accounts receivable would be

= (Accounts receivable, beginning of year + Accounts receivable, end of year) ÷ 2

This ratio derives that how much frequently is there for converting the account receivable to cash

hence, the correct option is d.