Which of the Following Statements Is CORRECT

question 2

Multiple Choice

Which of the following statements is CORRECT?

• A) If a security analyst saw that a firm's days' sales outstanding (DSO)was higher than the industry average and trending still higher,this would be interpreted as a sign of strength.
• B) A high average DSO indicates that none of the firm's customers are paying on time.In addition,it makes no sense to evaluate the firm's DSO with the firm's credit terms.
• C) There is no relationship between the days' sales outstanding (DSO)and the average collection period (ACP).These ratios measure entirely different things.
• D) A reduction in accounts receivable would have no effect on the current ratio,but it would lead to an increase in the quick ratio.
• E) If a firm increases its sales while holding its accounts receivable constant,then its days' sales outstanding will decline,other things held constant.

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Definitions:

Causal Relationship

A connection between two events where one is understood to be directly responsible for causing the other.

Randomly Assigned

A process in experimental design where participants are allocated to different groups without any biases or predetermined patterns.

Knowledgeable

Possessing or showing a great deal of information, awareness, or understanding about specific subjects or topics.

Actor-Observer Effect

A cognitive bias in which people tend to attribute their own actions to situational factors, while attributing others' actions to their character or disposition.