[Anonymous]

Can some one here explain the following sentence from beckers home work question on ratios:

“A deterioration in the aging of receivables implies a greater receivables balance, which cause the turnover ratio to decline”

[Tux]

hmmmm…. I haven't gotten that far.

I suggest contacting Becker's Academic Support department. I email tons of questions to them. It's been a HUGE help. They say to allow for a 48 hour response time, but most responses are quicker than that.

FAR - 86 - 2/27/14
AUD - 75 - 5/29/14
BEC - 80 - 8/31/14
REG - 89 - 2/27/15
Praise Jesus! I'm done!!

Study resources:
Becker
Wiley test bank

[Anonymous]

If a company is deteriorating at collecting their receivables, it means that their A/R balance is going to increase. The formula for A/R Turnover is Net Credit Sales/A/R. So if Net Credit Sales remain steady and A/R increases, your ratio will decrease.

$100,000 Net Credit Sales / $25,000 A/R = 4

$100,000 Net Credit Sales / $50,000 A/R = 2

Whenever I have conceptual questions on ratios, I always make up my own numbers to use in the ratio so I can more easily follow what their asking.

Hope that helps!

[Author]

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