The FASB Concluded That If a Company Sells Its Product

question 116

Multiple Choice

The FASB concluded that if a company sells its product but gives the buyer the right to return the product, revenue from the sales transaction shall be recognized at the time of sale only if all of six conditions have been met. Which of the following is not one of these six conditions?

• A) The amount of future returns can be reasonably estimated.
• B) The seller's price is substantially fixed or determinable at time of sale.
• C) The buyer's obligation to the seller would not be changed in the event of theft or damage of the product.
• D) The buyer is obligated to pay the seller upon resale of the product.

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Definitions:

ROE

Return on Equity, a measure of financial performance calculated by dividing net income by shareholders' equity, indicating how effectively management is using shareholders’ funds to generate profit.

Debt Ratio

A financial metric that assesses a firm's level of indebtedness by dividing its total liabilities by its total assets.

Equity Multiplier

A financial leverage ratio that measures the portion of a company's assets that are financed by stockholders' equity.

Net Income

The company's net earnings following the subtraction of all costs and taxes from its income.