Question

PART A

The accounts receivable turnover ratio

Multiple Choice

• is not useful in determining changes in customer payment patterns.

• is computed using net credit sales and ending accounts receivable.

• is computed using net credit sales and average accounts receivable.

• uses total sales and not just credit sales in the computation.

PART B

Which of the following is not correct with respect to the debt to assets ratio?

Multiple Choice

• The percentage of long-term debt to assets would be higher for a utility company than for a retailer.

• A high debt ratio increases long-term solvency risk.

• Cyclical companies (those whose sales fluctuate widely due to changing economic conditions) generally have a higher debt to assets ratio.

• Cyclical companies (those whose sales fluctuate widely due to changing economic conditions) generally have a smaller debt to assets ratio.

Answer 1

Part A

is computed using net credit sales and average accounts receivable.

Part B

Cyclical companies (those whose sales fluctuate widely due to changing economic conditions) generally have a smaller debt to assets ratio.