Which One of the Following Statements Is Correct If a fiRm

question 153

Multiple Choice

Which one of the following statements is correct if a firm has a receivables turnover measure of 10?

• A) It takes a firm 10 days to collect payment from its customers.
• B) It takes a firm 36.5 days to sell its inventory and collect the payment from the sale.
• C) It takes a firm 36.5 days to pay its creditors.
• D) The firm has an average collection period of 36.5 days.
• E) The firm has ten times more in accounts receivable than it does in cash.

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Definitions:

Accounting Standards

Formal guidelines and rules for accounting practices that determine how financial statements are prepared and presented.

FASB

Financial Accounting Standards Board, an independent nonprofit organization responsible for establishing accounting and financial reporting standards for companies and nonprofit organizations in the United States.

Bright-line Rules

Clearly defined rules or standards that leave little ambiguity and are easy to implement or enforce.

Pronouncements

Official statements or declarations, often from authoritative entities, that dictate principles or procedures in various fields like accounting.