Trade Receivables Turnover Measures Credit Collection Time Steps: - Identify the question: It asks for the ratio showing time to collect payments from credit sales. - Recall definitions: Current ratio assesses short-term liquidity; acid-test excludes inventory; payables turnover measures payment speed to suppliers; receivables turnover tracks collection from customers. - Match to credit sales: Receivables turnover directly relates to how quickly payments are received for goods sold on credit. - Calculate collection period: Use formula (365 / turnover ratio) to find average days to collect. Why D is correct: - Trade receivables turnover = net credit sales / average trade receivables; its reciprocal (multiplied by 365) gives days to receive payment, directly informing managers on collection efficiency. Why the others are wrong: - A: Current ratio = current assets / current liabilities; measures overall liquidity, not collection time. - B: Liquid (acid-test) ratio = (cash + receivables + investments) / current liabilities; evaluates immediate liquidity without inventory, ignores payment timing. - C: Trade payables turnover = purchases / average payables; shows how fast suppliers are paid, not how fast customers …