Which of the Following Statements Is CORRECT

question 18

Multiple Choice

Which of the following statements is CORRECT?

• A) 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.
• B) 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.
• C) Because of the costs of granting credit,it is not possible for credit sales to be more profitable than cash sales.
• D) 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.
• E) Other things held constant,if a firm can shorten its DSO,this will lead to a higher current ratio.

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Definitions:

Null Hypothesis

A hypothesis that suggests there is no significant difference or effect, serving as a default position until evidence suggests otherwise.

Statistical Significance

A determination that a relationship between variables or a difference between groups is likely not due to chance, based on a predetermined threshold.

Reject

In the context of statistical hypothesis testing, to conclude that the evidence is sufficiently strong to discard the null hypothesis.

Binge Drinking

The consumption of an excessive amount of alcohol in a short period of time, typically defined as five or more drinks for men and four or more drinks for women in about two hours.