Which One of the Following Statements Is Correct If a Firm

question 73

Multiple Choice

Which one of the following statements is correct if a firm has a receivables turnover measure of 10?

• A) It takes a firm 10 days to collect payment from its customers.
• B) It takes a firm 36.5 days to sell its inventory and collect the payment from the sale.
• C) It takes a firm 36.5 days to pay its creditors.
• D) The firm has an average collection period of 36.5 days.
• E) The firm has ten times more in accounts receivable than it does in cash.

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Definitions:

Capital Account

This account records the investments made by owners or shareholders into a company, along with retained earnings and accumulated other comprehensive income.

Capital Balances

The amount of money that partners or owners have invested in a business, often reflected in the equity section of the balance sheet.

Net Income

Net income is the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue, representing the actual earnings retained.

Closing the Revenue

The process of transferring the balances from revenue accounts to a permanent equity account at the end of an accounting period.