The Accounting Principle That Requires That the Cost Flow Assumption

question 175

Multiple Choice

The accounting principle that requires that the cost flow assumption be consistent with the physical movement of goods is

• A)called the matching principle.
• B)called the consistency principle.
• C)nonexistent; that is, there is no such accounting requirement.
• D)called the physical flow assumption.

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Definitions:

Debt-to-Equity Ratio

A financial metric that shows the balance between the equity provided by shareholders and the debt leveraged to support a company's assets.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available for its day-to-day operations.

Long-term Liabilities

Financial obligations of a business that are due more than one year in the future, such as bonds payable or long-term loans.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.