# Which of the following best represents a positive product of a lower number of days’ sales in receivables ratio? A. collection of receivables is quick, and cash can be used for other business expenditures B. collection of receivables is slow, keeping cash secured to receivables C. credit extension is lenient D. the lender only lends to the top 10% of potential creditors

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

#### Solutions

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FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 9, Problem 11MC
Textbook Problem
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## Which of the following best represents a positive product of a lower number of days’ sales in receivables ratio?A. collection of receivables is quick, and cash can be used for other business expendituresB. collection of receivables is slow, keeping cash secured to receivablesC. credit extension is lenientD. the lender only lends to the top 10% of potential creditors

To determine

Concept introduction:

Days Sales uncollected:

This is an efficiency ratio that indicates the period for which credit sales remain as receivable. The ratio is calculated by multiplying Accounts receivable with 365 days and dividing the result by Net Sales. The formula for Days Sales uncollected is as follows:

Days Sales uncollected = Accounts Receivable * 365Net Sales

To choose:

The statement that best represents a lower number of day’s sales in receivable ratio.

### Explanation of Solution

A positive product of a lower number of day’s sales in receivable means Collection of receivable is quick. Hence, the correct option is A.

B. A positive product of a lower number of day’s sales in receivable means Collection of receivable is quick...

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