Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

Which of the following demonstrates that a company is managing its receivables well?

A low average collection period relative to industry standards

A high ratio of receivables to total sales

A high percentage of accounts receivable written off as uncollectible

An increasing trend in the allowance for doubtful accounts

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Verified step by step guidance

Understand the concept of managing receivables: Managing receivables well means the company is efficiently collecting payments from customers, minimizing bad debts, and maintaining healthy cash flow.

Analyze the options provided: Each option represents a different metric or indicator related to accounts receivable management. Evaluate how each option reflects the company's ability to manage receivables effectively.

Option 1: A low average collection period relative to industry standards. This indicates that the company collects payments from customers quickly, which is a positive sign of efficient receivables management.

Option 2: A high ratio of receivables to total sales. This could indicate that the company is relying heavily on credit sales, which might not necessarily mean good receivables management if customers are slow to pay.

Option 3 and 4: A high percentage of accounts receivable written off as uncollectible and an increasing trend in the allowance for doubtful accounts. Both of these suggest poor receivables management, as they indicate higher levels of bad debts and potential issues with customer payment reliability.