Answer (D) is correct . The accounts receivable turnover ratio equals net credit sales divided by average receivables. Hence, it will decrease if a company lengthens the credit period or the discount period because the denominator will increase as receivables are held for longer times.
Answer (A) is incorrect because Write-offs do not reduce net receivables (gross receivables – the allowance) and will not affect the receivables balance and therefore the turnover ratio if an allowance system is used.
Answer (B) is incorrect because A decline in sales near the end of the period signifies fewer credit sales and receivables, and the effect of reducing the numerator and denominator by equal amounts is to increase the ratio if the fraction is greater than 1.0.
Answer (C) is incorrect because An increase in cash sales with no diminution of credit sales will not affect receivables.
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