Which of the Following Is NOT True Regarding the Use

question 86

Multiple Choice

Which of the following is NOT true regarding the use of short-term debt?

• A) It must be rolled over more often than long-term debt.
• B) There is uncertainty connected with interest costs on short-term debt from year to year.
• C) The firm is subjected to greater liquidity risk when using short-term credit.
• D) Interest rates are usually higher on short-term debt.

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Definitions:

Direct Write-off

An accounting method where uncollectible accounts receivable are written off directly against income at the time they are deemed irrecoverable.

Net Realizable Value

The estimated selling price of an item of inventory less any direct costs of disposal, such as sales commissions.

Allowance for Doubtful Accounts

A contra-asset account representing estimated uncollectible accounts receivable due to the customer's inability to pay.

Accounts Receivable

Money owed to a company by its customers for goods or services that have been delivered but not yet paid for.