When analyzing a company's financial statements, a significant decrease in the accounts receivable turnover ratio from one year to the next generally indicates:

Question: When analyzing a company's financial statements, a significant decrease in the accounts receivable turnover ratio from one year to the next generally indicates:

Answer options:

• An improvement in credit sales.
• A more efficient collection of receivables. ✅ A slower collection of receivables or increased bad debts.
• An increase in cash sales.

Correct answer: A slower collection of receivables or increased bad debts.

Explanation: A decrease in the accounts receivable turnover ratio indicates that the company is taking longer to collect its receivables or that there may be an increase in uncollectible accounts, signaling less efficient management or worsening credit quality.