Answer the following statements true (T) or false (F)

Question

1) The accounts receivable turnover ratio indicates whether a company could pay all its current liabilities if they were to become due immediately.
2) The accounts receivable turnover ratio is computed by dividing net credit sales by ending net accounts receivable.
3) The number of times a company collects the average accounts receivable balance in a year is known as the accounts receivable turnover ratio.
4) Days' sales in receivables is also called the collection period.
5 The days' sales in receivables indicates the number of days it takes to collect the average level of accounts receivable.

Answer 1

1) FALSE
2) FALSE - The accounts receivable turnover ratio is computed by dividing net credit sales by average
net accounts receivable.
3) TRUE
4) TRUE
5) TRUE