If a Firm's Sales and Those of Its Customers Are

question 48

True/False

If a firm's sales and those of its customers are closely correlated with economic conditions, it is certainly possible for a firm's total investment in accounts receivable to decrease while its days sales outstanding increases.

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Definitions:

Net Purchases

The total amount of purchases after subtracting any returns, allowances, and discounts over a specific period.

Purchase Returns

Occurs when a buyer returns merchandise that it had purchased from a supplier, often due to issues like defects or dissatisfaction.

Purchase Discounts

Reductions in the purchase price of goods, often granted by suppliers for early payment.

Profit Margin

The percentage difference between a product's selling price and the cost to produce it, indicating the financial health and profitability of a business.