Monthly statements speed up customer payments

Steps:

• Issuing monthly statements reminds customers of due amounts, prompting faster payments.
• Faster payments reduce the average time receivables remain outstanding.
• Lower average receivables balance improves efficiency in collecting debts.
• This directly boosts the trade receivables turnover ratio.

Why D is correct:

• Trade receivables turnover = Credit sales / Average trade receivables; faster collection lowers average receivables, increasing the ratio.

Why the others are wrong:

• A: Current ratio (current assets / current liabilities) unaffected, as cash from collections offsets receivables reduction.
• B: Liquid test ratio (quick assets / current liabilities) similarly unchanged in net effect.
• C: Trade payables turnover (purchases / average payables) relates to supplier payments, not customer collections.

Final answer: D