Michael Has a Sense That His Business Isn't Doing as Well

question 23

Multiple Choice

Michael has a sense that his business isn't doing as well as it should but he isn't sure what to look for to confirm his suspicions. Which one of the following could be a signal that the business is in trouble?

• A) difficulty finding skilled candidates
• B) tolerance of work incompetence
• C) more work than the business can handle
• D) long lead times for new orders

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Definitions:

Direct Write-Off Method

The direct write-off method is an accounting practice of charging unpaid debts directly to expense when they are deemed uncollectible, bypassing the allowance for doubtful accounts.

Accounts Receivable Turnover

A financial ratio indicating how many times a company's receivables are collected, or turned over, during a reporting period.

Bad Debt Expense

An expense account reflecting amounts that are expected to be uncollectible from customers' credit sales.

Bad Debt Expense

An estimated expense that represents the amount of receivables a company does not expect to collect due to customer defaults.