Which of the Following Statements Is Correct

question 21

Multiple Choice

Which of the following statements is correct?

• A)In the text, depreciation is regarded as a use of cash because it reduces fixed assets, which then must be replaced.
• B)If a company uses some of its cash to pay off short-term debt, then its current ratio will always decline, given the way ratio is calculated, other things held constant.
• C)During a recession, it is reasonable to think that most companies inventory turnover ratios will change while their fixed asset turnover ratio will remain fairly constant.
• D)During a recession, we can be confident that most companies' DSOs (or ACPs) will decline because their sales will probably decline.
• E)Each of the above statements is false.

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Definitions:

Marginal Social Benefit

The additional benefit to society from consuming one more unit of a good or service.

Marginal Private Cost

The cost incurred by a firm for producing one additional unit of a good, exclusive of any external costs.

Technology Spillovers

Benefits that firms or countries obtain by imitating or learning from the innovations of others, often without incurring the cost of innovation.

Subsidies

Financial assistance grants or tax breaks provided by the government to support businesses, organizations, or individuals, encouraging production or consumption of certain goods and services.