Other Things Equal, the Days Sales Outstanding (DSO) of Firm

question 41

Multiple Choice

Other things equal, the days sales outstanding (DSO) of Firm A is 20 days and the days sales outstanding (DSO) of Firm B is 30 days. Which of the following statements about the firms is correct?

• A) Firm A takes more time to collect its receivables than Firm B.
• B) Firm A has tighter credit terms than Firm B.
• C) Firm A has a weaker collection team than Firm B.
• D) Firm A provides less discount to its customers to pay its bills early than Firm B.
• E) Firm A has weaker receivables monitoring system than Firm B.

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Definitions:

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value over time.