Other things equal, the days sales outstanding (DSO) of Firm A is 20 days and th
ID: 2789110 • Letter: O
Question
Other things equal, the days sales outstanding (DSO) of Firm A is 20 days and the days sales outstanding (DSO) of Firm B is 30 days. Which of the following statements about the firms is correct?
Firm A has a weaker collection team than Firm B.
Firm A takes more time to collect its receivables than Firm B.
Firm A provides less discount to its customers to pay its bills early than Firm B.
Firm A has tighter credit terms than Firm B.
Firm A has weaker receivables monitoring system than Firm B.
a.Firm A has a weaker collection team than Firm B.
b.Firm A takes more time to collect its receivables than Firm B.
c.Firm A provides less discount to its customers to pay its bills early than Firm B.
d.Firm A has tighter credit terms than Firm B.
e.Firm A has weaker receivables monitoring system than Firm B.
Explanation / Answer
Days sales outstanding of Firm A is 20 days whereas Days sales outstanding of Firm B is 30 days. Firm A takes less time to collect its receivables this is possible because of stronger collection team and stronger receivables monitoring system. offering higher discount will attract customers to pay dues before the credit period.
Correct Answer D.
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