For each of the following liquidity ratios, indicate whether the change would be viewed as an improvement
Question:
For each of the following liquidity ratios, indicate whether the change would be viewed as an improvement or deterioration:
a. A decrease in the receivables turnover
b. A decrease in the collection period
c. An increase in the days sales in inventory
d. An increase in the inventory turnover
e. A decrease in the acid-test ratio
f. An increase in the operating cycle
Step by Step Answer:
a Deterioration A decrease in the receivables turnover would be viewed as deterioration It is taking ...View the full answer
Accounting Principles Volume 2
ISBN: 9781119786634
9th Canadian Edition
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak
Related Video
Days sales outstanding (DSO) is a measure of the average number of days that it takes a company to collect payment for a sale. DSO is often determined on a monthly, quarterly, or annual basis. To compute DSO, divide the average accounts receivable during a given period by the total value of credit sales during the same period and multiply the result by the number of days in the period being measured.
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