Which of the Following Is TRUE? the Most Important Factor

question 44

Multiple Choice

Which of the following is TRUE? The most important factor that a creditor considers in making its decision to grant credit to a debtor is

• A)the assets that the debtor has.
• B)whether other creditors have already taken security interests in the assets of the debtor.
• C)whether the debtor will be able to pay the credit obligation.
• D)whether someone can be found who will give a personal guarantee of the debtor's obligation to the creditor.
• E)whether the debtor is a corporation.

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Definitions:

Replacement Cost

The cost to replace an item or asset at current prices, disregarding its original purchase price or accumulated depreciation.

Operating Margin

A profitability measure calculated as operating income divided by revenue, showing the percentage of profits generated from operations before taxes and interest.

Variable Costing

An accounting method that only includes variable production costs (costs that change with the level of output) in the cost of goods sold and treats fixed costs as period costs.

Absorption Costing

A pricing technique that integrates all expenses related to production, such as direct materials, direct labor, along with both variable and fixed overhead costs, into a product's cost.