The Measure of How Long It Takes a Firm to Convert

question 42

Multiple Choice

The measure of how long it takes a firm to convert a credit sale into a usable form is known as which of the following?

• A) Average collection period
• B) Inventory turnover
• C) Quick ratio
• D) Current ratio

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Definitions:

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life evenly, resulting in a consistent expense charge over each period.

Double-Declining-Balance Depreciation

A method of accelerated depreciation in which an asset's book value is reduced at double the rate of its straight-line depreciation.

Retrospective Approach

The retrospective approach in accounting involves restating past financial statements as if a new accounting policy had been in effect in those periods, to provide consistency in financial reporting.

Depreciation Rate

The percentage or method used annually to allocate the cost of a tangible asset over its useful life, reflecting its consumption, wear and tear, or obsolescence.