The traditional definitions of collection period and inventory turnover are criticized because in both cases balance sheet figures that are a result of approximately the last month of sales are related to annual sales (in the former case) or annual cost of goods sold (in the latter case) Why do the...

Both measures relate a balance sheet figure which was th ...

The traditional definitions of collection period and inventory turnover are criticized because in both cases balance sheet

Question:

The traditional definitions of collection period and inventory turnover are criticized because in both cases figures that are a result of approximately the last month of sales are related to annual sales (in the former case) or annual cost of goods sold (in the latter case). Why do these definitions present problems? Suggest a solution.
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...