Question

1) Shorting the length of time a company takes to collect out standing balances would?

A) Increase the average collection period

B) Decrease the average collection period

c) Decrease receivables turnover

D)Increase inventory turnover

2) Asset utilization ratios include all but which of the following?

A) Receivables Turnover

B) Inventory turnover

C) Average collection period

D) Return on assets

3) If a company's current assets increase, what might we assume about their inventory levels?

A) It increased

B) It decreased

C) It stayed the same

D) We don't have enough information to decide

4) A company can increase its current ration by:

A) Increase current assets

B) Decreasing current assets

C) Increasing current liabilities

D) Decreasing total liabilities

5) In trying to measure a company's effectiveness in earning an adequate return on sales we would use which groups of ratios?

A) Profitability ratios

B) Asset utilization ratios

C) Liquidity ratios

D) Debt utilization ratios

Answer 1

Solution:

1.collection period is the average number of days taken by the entity to collect receivables from customer.

Shorting the lenth of time a company takes to collect out standing balances means company collecting receivables from customer more frequently.Consequently average receivable will decrease.

Low receivables is the result of decrease in the average collection period.Thus the correct option is option 'B' i.e. Decrease the average collection period