Which of the Following Statements Is CORRECT

question 89

Multiple Choice

Which of the following statements is CORRECT?

• A) Borrowing by using short-term notes payable and then using the proceeds to retire long-term debt is an example of "window dressing." Offering discounts to customers who pay with cash rather than buy on credit and then using the funds that come in quicker to purchase additional inventories is another example of "window
• Dressing."
• B) Borrowing on a long-term basis and using the proceeds to retire short-term debt would improve the current ratio and thus could be
• Considered to be an example of "window dressing."
• C) Offering discounts to customers who pay with cash rather than buy on credit and then using the funds that come in quicker to purchase
• Additional inventories is an example of "window dressing."
• D) Using some of the firm's cash to reduce long-term debt is an
• Example of "window dressing."
• E) "Window dressing" is any action that improves a firm's fundamental, long-run position and thus increases its intrinsic value.

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Definitions:

Rule Of Thumb

A general principle or guideline that is not strictly accurate or reliable for every situation but is used because of its practicality.

Standard Cost

Predetermined costs for manufacturing or service processes, used as benchmarks for performance evaluation.

Variance Investigation

The process of examining the reasons behind differences between budgeted and actual figures in finance and accounting.

Direct Material Quantity Variance

The difference between the budgeted amount of materials needed for production and the actual amount used, valued at the standard cost.