Which of the Following Statements Is CORRECT

question 23

Multiple Choice

Which of the following statements is CORRECT?

• A)If a security analyst saw that a firm's days' sales outstanding (DSO) was higher than the industry average, and was increasing and trending still higher, this would be interpreted as a sign of strength.
• B)A high average DSO indicates that none of its customers are paying on time. In addition, it makes no sense to evaluate the firm's DSO with the firm's credit terms.
• C)There is no relationship between the days' sales outstanding (DSO) and the average collection period (ACP). These ratios measure entirely different things.
• D)A reduction in accounts receivable would have no effect on the current ratio, but it would lead to an increase in the quick ratio.
• E)If a firm increases its sales while holding its accounts receivable constant, then, other things held constant, its days' sales outstanding will decline.

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Definitions:

National Highway Traffic Safety Administration

A U.S. government agency responsible for enforcing vehicle performance standards and partnerships aimed at improving road safety.

Recalls Autos

The process by which manufacturers issue a request to return a batch of automobiles due to discovered defects or safety issues.

Consumer Product Safety Commission

A U.S. federal agency responsible for the regulation of the sale and manufacture of consumer products to ensure they do not pose a risk of injury or harm to the public.

Product Safety Standards

Regulations established to ensure that products meet minimal safety criteria to protect consumers.