Which of the Following Statements Is CORRECT

question 43

Multiple Choice

Which of the following statements is CORRECT?

• A) 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.
• B) 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.
• C) 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.
• D) 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.
• E) Other things held constant, the higher a firm's days sales outstanding (DSO), the better its credit department.

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Definitions:

Infant Industry

The infant industry argument supports protecting emerging domestic industries from international competition until they become competitive internationally.

Technological Efficiency

A state of production where a business cannot produce more of one good without lowering the production level of another good, given current technology.

Import Protection

Measures by a government to restrict foreign imports to protect domestic industries.

Import Quotas

Restrictions set by a country on the amount or volume of goods that can be imported into the country over a set period of time.