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Commercial Pilot Licence (CPAER) – Canada · Question

An increase in a company's accounts receivable turnover ratio usually indicates that the company is:

Accounts receivable turnover ratio calculates how many times a company collects its average accounts receivable during a period. A higher ratio indicates that t

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Question: An increase in a company's accounts receivable turnover ratio usually indicates that the company is:

Answer options:

  • Granting more liberal credit terms. ✅ Collecting its accounts receivable more quickly.
  • Experiencing a decline in sales.
  • Increasing its inventory levels.

Correct answer: Collecting its accounts receivable more quickly.

Explanation: Accounts receivable turnover ratio calculates how many times a company collects its average accounts receivable during a period. A higher ratio indicates that the company is more efficient at collecting its outstanding debts.

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