Which of the Following Statements Is CORRECT

question 23

Multiple Choice

Which of the following statements is CORRECT?

• A)If a security analyst saw that a firm's days' sales outstanding (DSO) was higher than the industry average, and was increasing and trending still higher, this would be interpreted as a sign of strength.
• B)A high average DSO indicates that none of its customers are paying on time. In addition, it makes no sense to evaluate the firm's DSO with the firm's credit terms.
• C)There is no relationship between the days' sales outstanding (DSO) and the average collection period (ACP). These ratios measure entirely different things.
• D)A reduction in accounts receivable would have no effect on the current ratio, but it would lead to an increase in the quick ratio.
• E)If a firm increases its sales while holding its accounts receivable constant, then, other things held constant, its days' sales outstanding will decline.

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Definitions:

Milling

A mechanical process that involves grinding, cutting, or crushing materials to create finer particles.

Subsurface Oil

Oil deposits located beneath the surface of the Earth, typically extracted through drilling operations.

Overthrust Belt

A region in the earth's crust where large areas of rock have been moved over one another typically due to compressional forces.

Anticline

A type of fold that is convex up and has its oldest beds at its core, often associated with the trapping of petroleum.