The Most Important Information Needed to Determine If Companies Can

question 28

Multiple Choice

The most important information needed to determine if companies can pay their current obligations is the

• A) net income for this year.
• B) projected net income for next year.
• C) relationship between current assets and current liabilities.
• D) relationship between short-term and non-current liabilities.

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Definitions:

Percent of Sales Method

A financial analysis technique used to forecast future expenses or account balances as a percentage of sales revenue.

Direct Write-off Method

An accounting method where uncollectible accounts receivable are written off directly against income at the time they are deemed noncollectible.

Uncollectible Receivables

Receivables considered uncollectible by a company and therefore recorded as a loss.

Journalize

The process of recording transactions in the general journal using the double-entry bookkeeping system.