Answered: increasing collection period for trade…

Business

Accounting

increasing collection period for trade receivable suggest about a firm’s credit policy

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 11MC: Which of the following best represents a positive product of a lower number of days sales in...

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Concept explainers

Conversion Cycle

Conversion cycle is also known as cash cycle or net operating cycle. Conversion cycle refers to how much time a company takes to turn its investments which is done from stock or any other financial resources into cash flows from sales.

Question

7. What does an increasing collection period for trade receivable suggest about a firm’s credit policy?

A. The business is making profits.

B. The credit policy is too restrictive.

C. The credit policy may be too lenient.

D. The business is probably losing qualified customers.

E. The collection period has no relationship to a business’s credit policy.

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