Answer:
A. how frequently during the year the accounts receivable are converted to cash
Explanation:
The account receivable turnover is calculate as follow:
[tex]\frac{sales}{average \: AR}[/tex]
where:
average AR:
(beginning + ending ) / 2
This represent how many times the Account receivable are collected. Which means, coverted into cash.
A TO ratio of 1 means the sales are collected through the year.
A TO ratio of 2 means the AR are collected 2 times over the year
A TO ratio of 10 means the AR are colelcted 10 times over the course of a year.
To get days outstanding, we divide the 365 days per year over the TO ratio
