T / F) A company that is quite profitable may find it difficult to pay its accounts payable if a large portion of its sales are made on accounts receivable.
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Question & Answer: T / F) A company that is quite profitable may find it difficult to pay its accounts payable if a large por…..
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True. A company which has high accounts receivables and thus, lower Accounts receivable turnover implies that the company is extending large credit line to its customers. This indicates that the collection from accounts receivable is not efficient and the company has an aggressive credit policy, poor collecting processes. This will hinder the liquidity of the company and it may find difficult to pay its accounts payable.