Which of the Following Statements Best Describes DSO and Aging

question 64

Multiple Choice

Which of the following statements best describes DSO and aging?

• A) If a firm's volume of credit sales declines, then its DSO must also decline.
• B) If a firm changes its credit terms from 1/20, net 40, to 2/10, net 60, the impact on sales can't be determined because the increase in the discount is offset by the longer net terms, which tends to reduce sales.
• C) The DSO of a firm with seasonal sales can vary. While the sales per day calculation is usually based on the total annual sales, the accounts receivable balance will be high or low depending on the season.
• D) An aging schedule is used to determine what portion of customers pay cash and what portion buy on credit.

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Definitions:

Prospect Theory

A theory in behavioral economics explaining the decision-making process of individuals when faced with alternatives that have uncertain outcomes, with known probabilities of these outcomes.

Behavioral Economics

A field of economic research that studies the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions.

Policymakers

Individuals or groups responsible for making decisions and laws that govern a society, often within governmental institutions.

Neuroscience

The scientific study of the nervous system, including its structure, functions, and abnormalities.