Question

Which one of the following statements is NOT true? Question 6 options: DSO measures in days, the time the firm takes to convert its receivables into cash. One ratio that measures the efficiency of a firm's collection policy is days' sales outstanding. The accounts receivables turnover ratio measures how quickly the firm collects on its credit sales. The more days that it takes the firm to collect on its receivables, the more efficient the firm is.

Answer 1

The more days that it takes the firm to collect on its receivables, the more efficient the firm is.

Step-by-step explanation:

Days of sales outstanding is an activity ratio.

DSO = number of days in a period / receivables turnover

DSO measures the efficiency of a firm's collection policy of its receivables

Receivables turnover ratio = Revenue / average receivables

The faster it is for a firm to collect its receivables, the more efficient it is