In Year 1,a Company Had Net Sales of $50,000 and Ending

question 22

Multiple Choice

In year 1,a company had net sales of $50,000 and ending accounts receivable of $2,000.In year 2,this company had net sales of $80,000 and ending accounts receivable of $4,000.Use days' sales uncollected to determine which of the following statements is true:

• A)Days' sales uncollected in year 1 is 14.6 days and in year 2 is 18.25 days.This measure indicates that the company's liquidity is declining.
• B)Days' sales uncollected in year 1 is 14.6 days and in year 2 is 18.25 days.This measure indicates that the company's liquidity is improving.
• C)Days' sales uncollected in year 1 is 25 days and in year 2 is 20 days.This measure indicates that the company's liquidity is declining.
• D)Days' sales uncollected in year 1 is 25 days and in year 2 is 20 days.This measure indicates that the company's liquidity is improving.
• E)Days' sales uncollected in year 1 is .04 days and in year 2 is .05 days.This measure indicates that the company's liquidity is improving.

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Definitions:

Statute of Frauds

A legal principle requiring certain contracts to be in writing and signed in order to be enforceable.

Enforceable

Capable of being implemented or compelled to act in accordance with laws, rules, or agreements.

Lease

A contractual agreement by which one party conveys property, services, or land to another for a specified time, usually in return for a periodic payment.

Domestic Relationships

Interpersonal relationships that are characterized by a significant degree of personal intimacy or commitment, including family relationships and cohabitation.