An increasing average collection period indicates
1)the firm is generating more income.
2) accounts receivable are going down. 3) the company is becoming more efficient in its collection policy.
4) the company is becoming less efficient in its collection policy.
An increasing average collection period indicates that it is taking the company longer to collect payments from its customers. To analyze the given options:
1) The statement that an increasing average collection period indicates the firm is generating more income is not necessarily true. The collection period relates to the time it takes to collect the payments from customers, and it may not directly correlate with the firm's income generation.
2) The statement that an increasing average collection period indicates accounts receivable are going down is incorrect. In fact, an increasing average collection period suggests that accounts receivable are building up and are taking longer to collect.
3) The statement that an increasing average collection period indicates the company is becoming more efficient in its collection policy is incorrect. If it takes longer to collect payments, it suggests that the collection policy may not be as efficient, as it is taking more time to receive payments.
4) The correct answer is that an increasing average collection period indicates the company is becoming less efficient in its collection policy. As mentioned earlier, a longer collection period indicates that it is taking the company more time to collect payments from customers, which can be a sign of inefficiency in the collection process.
In summary, an increasing average collection period implies that the company is becoming less efficient in its collection policy.