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A change in credit policy has caused an increase in sales, an increase in discounts taken, a reduction in the investment in accounts receivable, and a reduction in the number of doubtful accounts. Based upon this information, we know that:
Suggested Answer: B
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Choice 'b' is correct. Whenever accounts receivable (AR) are decreasing when sales are increasing (and the decrease in AR is not due to an increase in bad debt write offs), this would indicate that the average collection period for AR has decreased.
Choices 'a', 'c', and 'd' are incorrect. There is insufficient information in the question to draw conclusions about these items.
8 comments · newest first
JU
Justine
11 months ago
Discounts taken are up, but that could hurt gross profit, right?
KE
Keneth
12 months ago
Totally agree, less doubtful accounts means better cash flow!
LE
Leanna
12 months ago
Wait, how can we be sure net profit increased?
TE
Temeka
12 months ago
I think the average collection period has definitely decreased.
PA
Pamella
1 year ago
Sales are up, so that's a good sign!
DE
Denny
1 year ago
Hmm, I'm a bit unsure on this one. The options seem to cover different aspects of resource management, but I'm not sure which one specifically matches the scenario described. I'll have to think this through carefully.
RU
Ruthann
1 year ago
This is a good test of my PROC FREQ knowledge. I'll carefully review each option, thinking about the specific syntax and how it would impact the output. I'm confident I can figure this out.
SH
Shizue
1 year ago
To provide the necessary attenuation, maybe in the aisle is correct? That way it could limit interference from all directions, but I have my doubts.