Chapter 13, Problem 8DQ

Summary Introduction

Concept Introduction:

Accounts receivable turnover ratio: This is an efficiency ratio that indicates the relation between credit sales and average accounts receivable. The formula to calculate this ratio is as follows:

  $\text{Accounts receivable turnover ratio = }\frac{\text{Net credit Sales}}{\text{Average accounts receivable}}$

  $$

To discuss: the indication about short term liquidity by a high accounts receivable turnover.