Question : Which of the following answers is correct?
A: The average collection period can be used to assess credit and collection policies.
B: The solvency ratios provide critical information for the firm's long-term operation.
Option 1: Option A
Option 2: Option B
Option 3: Both of the above
Option 4: None of the above
Correct Answer: Both of the above
Solution :
The average collection period is the number of days it takes for a company to collect and convert its accounts receivable into cash.
The Solvency Ratio is one of several ratios used to evaluate a company's ability to repay long-term debts.
The solvency ratios provide critical information to the firm's long-term operations.
Hence option C is the correct answer.
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