Why Would an Exporter Most Likely Consider an Open Account

question 115

Multiple Choice

Why would an exporter most likely consider an open account undesirable?

• A) high fees from host country governments
• B) heavy reliance on financial institutions
• C) significant paperwork required
• D) working capital tied up

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Definitions:

Sum-Of-Years' Digits

An accelerated method of depreciation which involves allocating the cost of an asset over its useful life in a way that results in higher depreciation expense in the earlier years and lower expense in later years.

Salvage Value

The anticipated market value of an asset upon completing its service life.

Matching Principle

An accounting principle that requires expenses to be matched with the revenues they helped to generate in the same period.

Amortization

The gradual reduction of a debt over a period of time or the spreading out of capital expenses related to intangible assets over their useful life.