Which of the Following Statements Is CORRECT

question 49

Multiple Choice

Which of the following statements is CORRECT?

• A) Other things held constant,the higher a firm's days sales outstanding (DSO),the better its credit department.
• B) If a firm that sells on terms of net 30 changes its policy to 2/10,net 30,and if no change in sales volume occurs,then the firm's DSO will probably increase.
• C) If a firm sells on terms of 2/10,net 30,and its DSO is 30 days,then the firm probably has some past due accounts.
• D) If a firm sells on terms of net 60,and if its sales are highly seasonal,with a sharp peak in December,then its DSO as it is typically calculated (with sales per day = Sales for past 12 months/365)would probably be lower in January than in July.
• E) If a firm changed the credit terms offered to its customers from 2/10,net 30 to 2/10,net 60,then its sales should increase,and this should lead to an increase in sales per day,and that should lead to a decrease in the DSO.

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Definitions:

Raw Materials

Basic materials used in the manufacturing process to produce finished goods, not yet processed or used in production.

Selling And Administrative Costs

Expenses related to the selling of products and the administrative aspects of a business, excluding production costs.

Direct Labor Costs

The expenses that a company incurs through the wages paid to workers directly involved in manufacturing goods or providing services.

Manufacturing Overhead

Indirect factory-related costs that are incurred when a product is manufactured, including costs such as depreciation, utilities, and salaries for supervisors.