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Question
A better debtors turnover ratio may be achieved reducing the amount tied up in receivable.
A better debtors turnover ratio may be achieved reducing the amount tied up in receivable.
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Solution
The correct option is A True
Higher debtor’s turnover ratio and lower collection period are what a company would want. A lower collection period would mean faster conversion of credit sales to cash. One can say that lower the average collection period higher the efficiency of the company in managing its credit sales and vice versa. Higher debtor’s turnover ratio indicates faster turnaround and reflects positively on the liquidity of the company. The faster collection would keep the company having cash to pay off its creditors and thereby reduce the working capital cycle for a better
Higher debtor’s turnover ratio and lower collection period are what a company would want. A lower collection period would mean faster conversion of credit sales to cash. One can say that lower the average collection period higher the efficiency of the company in managing its credit sales and vice versa. Higher debtor’s turnover ratio indicates faster turnaround and reflects positively on the liquidity of the company. The faster collection would keep the company having cash to pay off its creditors and thereby reduce the working capital cycle for a better
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