Question 6 (1 point) Which one of the following statements is NOT true? Question
ID: 2631050 • Letter: Q
Question
Question 6 (1 point)
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.
Question 7 (1 point)
Blue Air Inc., has net sales of $767,000 and accounts receivables of $164,000. What are the firm's accounts receivables turnover?
A)DSO measures in days, the time the firm takes to convert its receivables into cash.
B)One ratio that measures the efficiency of a firm's collection policy is days' sales outstanding.
C)The accounts receivables turnover ratio measures how quickly the firm collects on its credit sales.
D)The more days that it takes the firm to collect on its receivables, the more efficient the firm is.
Explanation / Answer
Problem 1
Correct answer is
D. The more days that it takes the firm to collect on its receivables, the more efficient the firm is.
In reality, it is just the opposite. The lower the days that it takes the firm to collect, the more efficeint the firm is.
Problme 2: Blue Air Inc., has net sales of $767,000 and accounts receivables of $164,000. What are the firm's accounts receivables turnover?
Accounts receivable turnover = 767,000 / 164,000 = 4.68
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