From the course: Job Interview Tips for Accountants

How to approach this question

From the course: Job Interview Tips for Accountants

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How to approach this question

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- This question throws some for a loop. It explains a decrease in value, but that's not necessarily a positive outcome for a company. It fundamentally assesses your financial and accounting technical skills, and how well you recognize the implications and results from this accounting calculation. Structure your reply by defining the ratio explaining what's happening and then provide a solution. First, restate the technical concept. Define accounts receivable turnover. Outline why it's calculated and measured, and what the ratio communicates for the organization. Share that AR turnover measures a company's effectiveness in collecting receivables or money owed by clients. Next, focus on impacts. Accounting analysts will often monitor the AR turnover ratio to see how well the organization is collecting what clients owe them as this has a direct impact on short-term cashflow. Finally, speak to financial controls and policy adjustments. Explain that cash collections and payment policy dictates short-term liquidity. A stricter credit policy means that clients may purchase from competitors whereas a liberal policy may extend credit to less than reliable clients and poor payment collection. You may not have the most relevant or even eloquent solution, but that's not what's important. This question is assessing your technical acumen with your ability to recognize the issue. Answering this way shows the interviewer you're more than just an accountant. You can also bring analysis and solutions to problems.

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