Question

Set up 1: Suppose a company increases its sales by giving customers an “interest holiday” whereby customers can delay payment for the goods and pay no interest. The company offers this option because its sales growth is falling behind projections. Some customers, who would otherwise pay cash, will take advantage of this offer causing the company's receivables to increase by 10% while its sales only increased by 6%. Using Set up 1, what happens to the receivables turnover ratio and days of sales outstanding? Group of answer choices Receivables turnover ratio increases and the days of sales outstanding increases Receivables turnover ratio decreases and the days of sales outstanding increases Receivables turnover ratio decreases and the days of sales outstanding decreases Receivables turnover ratio increases and the days of sales outstanding does not change

          Set up 1: Suppose a company increases its sales by giving customers an “interest holiday” whereby customers can delay payment for the goods and pay no interest. The company offers this option because its sales growth is falling behind projections. Some customers, who would otherwise pay cash, will take advantage of this offer causing the company's receivables to increase by 10% while its sales only increased by 6%.
Using Set up 1, what happens to the receivables turnover ratio and days of sales outstanding?
Group of answer choices
Receivables turnover ratio increases and the days of sales outstanding increases
Receivables turnover ratio decreases and the days of sales outstanding increases
Receivables turnover ratio decreases and the days of sales outstanding decreases
Receivables turnover ratio increases and the days of sales outstanding does not change

Added by Laurie S.

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