Which of the following would best explain an increase in receivables turnover? A . The company adopted

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Which of the following would best explain an increase in receivables turnover?

A . The company adopted new credit policies last year and began offering credit to customers with weak credit histories.

B. Due to problems with an error in its old credit scoring system, the company had accumulated a substantial amount of uncollectible accounts and wrote off a large amount of its receivables.

C. To match the terms offered by its closest competitor, the company adopted new payment terms now requiring net payment within 30 days rather than 15 days, which had been its previous requirement.

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The receivables turnover ratio measures how many times a company can turn its accounts receivables into cash during a given period A higher receivables turnover ratio is preferable as it indicates that the company collects its receivables more frequently Lets analyze each of the provided options and their likely impact on the receivables turnover ratio A The company adopted new credit policies last year and began offering credit to customers with weak credit histories This option would likely result in a decrease in the receivables turnover ratio not an increase Offering credit to customers with weak credit histories would likely lead to longer collection periods and a higher risk of uncollectible accounts both of which would reduce the receivables turnover ratio B Due to problems with an error in its old credit scoring system the company had accumulated a substantial amount of uncollectible accounts and wrote off a large amount of its receivables Writing off a large amount of its receivables decreases the accounts receivable ...View the full answer

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