Which of the following would cause a company's accounts receivable turnover ratio to decrease steadily over a three-year period?
Which of the following would cause a company's accounts receivable turnover ratio to decrease steadily over a three-year period?
A more liberal credit policy would typically lead to an increase in the number of credit sales and, consequently, in the accounts receivable. If customers are given more time to pay or if credit standards are relaxed, the accounts receivable turnover ratio would likely decrease because the outstanding receivables would take longer to be collected, thereby reducing the turnover ratio over time.
Because it could result to more accounts receivable (credit sales)