Explanation:
A relatively high receivables turnover ratio (and commensurately low DSO) might indicate highly efficient credit and collection. Option B is correct because a low number of days sales outstanding (DSO) reflects faster cash collection from customers, indicating efficiency in credit and collection processes. Option A is incorrect as a high receivables turnover ratio (low DSO) is the indicator, not a low ratio. Option C is irrelevant as it measures inventory efficiency, not credit collection.
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Compared to the industry average, which of the following financial ratios most likely indicates a company has a highly efficient credit and collection process? A relatively low:
A
receivables turnover ratio
B
number of days sales outstanding
C
number of days of inventory on hand