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What does too low ‘Trade Receivables Turnover Ratio’ indicate? - Accounts

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Question

What does too low ‘Trade Receivables Turnover Ratio’ indicate?

Short Answer
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Solution

Too low trade receivables. The turnover ratio shows that the company is taking longer to collect payments from its clients. This indicates inefficiencies in credit administration, potential problems with the collection process, or that consumers are not paying on time. A low percentage may cause cash flow issues and indicate the need for stricter credit standards or improved receivables management.

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Chapter 14: Ratio Analysis - SHORT ANSWER QUESTIONS [Page 14.111]

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D. K. Goel Accountancy Volume 1 and 2 [English] Class 12 ISC
Chapter 14 Ratio Analysis
SHORT ANSWER QUESTIONS | Q 60. | Page 14.111
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