All Else Equal, If a Firm Buys Inventory Using Trade

question 49

Multiple Choice

All else equal, if a firm buys inventory using trade credit, then its

• A)financial debt-to-capital will increase, and its financial debt-to-assets will decrease.
• B)financial debt-to-capital and financial debt-to-assets ratios will both increase.
• C)financial debt-to-capital will decrease, and its financial debt-to-assets will increase.
• D)financial debt-to-capital will be unchanged, and its financial debt-to-assets will decrease.

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Definitions:

Accrued Revenue

Income earned but not yet received, representing goods or services provided to customers on credit.

Supplies Used

The total value or quantity of materials and supplies consumed during a production or operational period.

End-Of-Period Adjusting Entries

Entries recorded in journals at the close of an accounting cycle to refresh the balances of accounts prior to the compilation of financial statements.

Supplies Account

An account used in accounting to track the amount spent on supplies that have not yet been used.