Which of the Following Statements Is CORRECT

question 30

Multiple Choice

Which of the following statements is CORRECT?

• A) In managing a firm's accounts receivable, it is possible to increase credit sales per day yet still keep accounts receivable fairly steady, provided the firm can shorten the length of its collection period (its DSO) sufficiently.
• B) Because of the costs of granting credit, it is not possible for credit sales to be more profitable than cash sales.
• C) Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio must also have a high payables-to-sales ratio.
• D) Other things held constant, if a firm can shorten its DSO, this will lead to a higher current ratio.
• E) A firm that makes 90% of its sales on credit and 10% for cash is growing at a constant rate of 10% annually.Such a firm will be able to keep its accounts receivable at the current level, since the 10% cash sales can be used to finance the 10% growth rate.

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Definitions:

Adler

Alfred Adler, an Austrian medical doctor and psychotherapist, known for his contributions to psychology including the development of individual psychology and ideas about inferiority complex.

Individualism

A social theory favoring freedom of action for individuals over collective or state control.

Efforts

The use of physical or mental energy to achieve something; often associated with a level of determination or perseverance in facing tasks or challenges.

Adler

Alfred Adler, an Austrian medical doctor and psychotherapist, known for his contributions to psychology especially the development of individual psychology.