The balance sheet and income statement of a particular firm are shown above. What does the account receivable days ratio tell you about this company?

Question

Balance Sheet
Assets Liabilities
Current Assets Current Liabilities
Cash 50 Accounts payable 42
Accounts receivable 22 Notes payable/short-term debt 7
Inventories 17
Total current assets 89 Total current liabilities 49

Long-Term Assets Long-Term Liabilities
Net property, plant,
and equipment 121 Long-term debt 128
Total long-term assets 121 Total long-term liabilities 128
Total Liabilities 177
Stockholders' Equity 33
Total Liabilities and
Total Assets 210 Stockholders' Equity 210

Income Statement
Total sales 312
Cost of sales -210
Gross Profit 102
Selling, general,
and administrative expenses -34
Research and development -10
Depreciation and amortization -5
Operating Income 53
Other income -
Earnings before interest
and taxes (EBIT) 53
Interest income (expense) -20
Pretax income 33
Taxes -8
Net Income 25

A) It takes on average about 4 weeks to collect payment from its customers.
B) It takes on average about 6 weeks to collect payment from its customers.
C) It takes on average about 7 weeks to collect payment from its customers.
D) It takes on average about 11 weeks to collect payment from its customers.

Answer 1

Answer: A