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# What information can best be elicited from a receivable ratio? A. company performance with current debt collection B. credit extension effect on cash sales C. likelihood of future customer bankruptcy filings D. an increase in future credit sales to current customers

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 9, Problem 13MC
Textbook Problem
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## What information can best be elicited from a receivable ratio?A. company performance with current debt collectionB. credit extension effect on cash salesC. likelihood of future customer bankruptcy filingsD. an increase in future credit sales to current customers

To determine

Concept introduction:

Accounts receivable turnover ratio:

This is an efficiency ratio that indicates the conversion of accounts receivable into cash. This ratio is calculated by dividing the Net credit Sales by the Average accounts receivable. The formula to calculate this ratio is as follows:

Accounts receivable turnover ratio = Net credit SalesAverage accounts receivable

To choose:

The analysis of receivable ratio.

### Explanation of Solution

Explanation for correct answer:

The receivables ratio indicates the Company performance with current debt collection. Hence the correct option is A.

Explanation for incorrect answers:

B. The receivables ratio does not indicate credit extension effect on cash sales...

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