The Theory of Constraints Is

question 25

Multiple Choice

The theory of constraints is

• A)a theory that the benefit of making a change in a production process should be weighed against the cost of making that change.
• B)that even the best suggestions for improvement are likely to be rejected due to opposition from those who have to implement the changes.
• C)a specific approach used to identify and manage constraints in order to achieve the company's goals.
• D)not applicable to service operations.

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Definitions:

Allowance for Doubtful Accounts

A contra-asset account that represents the estimated portion of accounts receivable that may not be collectible.

Uncollectible Accounts

Accounts receivable that are unlikely to be recovered and are considered bad debts.

Accounts Receivable Turnover

A financial ratio that measures how often a company collects its average accounts receivable, indicating the efficiency of credit and collections policies.

Average Collection Period

This metric calculates the average number of days it takes for a company to receive payments from its customers, indicating the efficiency of its credit and collection policies.