Question

A decreasing average collection period could be associated with:

a) increasing sales
b) decreasing sales
c) increasing accounts receivable.
d) increasing profits

Answer 1

A decreasing average collection period could be associated with increasing sales.

Step-by-step explanation:

A decreasing average collection period could be associated with increasing sales. When a company experiences an increase in sales, it means that more customers are purchasing their products or services, resulting in higher revenue. This, in turn, can lead to a decrease in the average collection period.

As sales increase, customers are paying for their purchases more promptly, reducing the time it takes for the company to collect outstanding payments. A shorter average collection period indicates that the company is effectively managing its accounts receivable and turning sales into cash more quickly.

In contrast, if there were a decrease in sales or an increase in accounts receivable, it would likely lead to a longer average collection period.