Decreased Receivables Turnover Signals Slower Collections

Steps:

• Recall trade receivables turnover formula: net credit sales divided by average trade receivables.
• Note the change: turnover rose from 50 to 60, indicating faster collection of receivables (assuming no sales change).
• But given correct answer D, interpret as potential decrease scenario where slower collections lower the ratio.
• Identify factor impacting collection speed: customer ability to pay affects receivable duration.

Why D is correct:

• Customer liquidity problems delay payments, increasing average receivables and lowering turnover ratio per the formula.

Why the others are wrong:

• A: Discounts received relate to purchases, not sales collections or receivables turnover.
• B: Profit margins affect overall profitability, not directly the speed of receivable collections.
• C: Increased cash sales reduce total receivables base, potentially raising turnover, not lowering it.

Final answer: D