Which of the Following Statements Is CORRECT

question 82

Multiple Choice

Which of the following statements is CORRECT?

• A) Accruals are an expensive but commonly used way to finance working capital.
• B) A conservative financing policy is one where the firm finances part of its fixed assets with short-term capital and all of its net working capital with short-term funds.
• C) If a company receives trade credit under terms of 2/10, net 30, this implies that the company has 10 days of free trade credit.
• D) One cannot tell if a firm has a conservative, aggressive, or moderate current asset financing policy without an examination of its cash budget.
• E) If a firm has a relatively aggressive current asset financing policy vis-à-vis other firms in its industry, then its current ratio will probably be relatively high.
• Multiple Choice: Problems

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Definitions:

General Journal Entries

Basic accounting records where all day-to-day financial transactions of a business are initially recorded, before being transferred to specific accounts in the general ledger.

Purchase Discounts Lost

Purchase discounts lost refer to the additional amount paid by a buyer for failing to take advantage of the early payment discount offered by a supplier.

Net Method

An accounting technique used to record purchases or sales of goods after deducting any discounts offered at the time of purchase or sale.

Discounts Lost

Charges incurred from not taking advantage of early payment discounts offered by suppliers.