Question

An analyst observed a decrease in a company’s days in sales outstanding (DSO). Which of the...

An analyst observed a decrease in a company’s days in sales outstanding (DSO). Which of the following could explain this trend?

A. The company agreed on more lenient credit terms with its suppliers.

B. Due to a general economic downturn, customers needed to delay payments to the company

C. The company increased the allowance for doubtful accounts this year.

D. The company adopted more lenient credit terms for its customers

Business   Accounting   
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Homework Answers

Answer #1

Option (D) is correct.

Explanation:- Company makes the credit policy for Creditor(Accounts receivable that shown the outstanding amount of credit sales) . In policy, company estimate the Days of recovery amount that are due on customer in form of account receivable which occurred by Credit sales. If company needs early recovery of receivable , it provides the certain discount if receivable pay the amount before Estimated days . Through this lenient credit terms for its customers ,campany able to recover the outstanding balance before the Estimated outstanding days.

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