Which of the Following Statements Is Correct

question 33

Multiple Choice

Which of the following statements is correct?

• A) In the text,depreciation is regarded as a use of cash because it reduces fixed assets,which then must be replaced.
• B) If a company uses some of its cash to pay off short-term debt,then its current ratio will always decline,given the way the ratio is calculated,other things held constant.
• C) During a recession,it is reasonable to think that most companies' inventory turnover ratios will change while their fixed asset turnover ratios will remain fairly constant.
• D) During a recession,we can be confident that most companies' DSOs (or ACPs)will decline because their sales will probably decline.
• E) Each of the above statements is false.

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Definitions:

Similar Events

Incidents or occurrences that share common characteristics or outcomes, often analyzed in financial contexts to predict future trends.

Public Company Accounting Oversight Board

An independent oversight body established by Congress to oversee the audits of public companies in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports.

Auditing Standards

Rules and guidelines set by governing bodies that dictate the auditing process, ensuring consistency, and reliability in financial reporting.

Sarbanes-Oxley Act

A U.S. federal law enacted in 2002 to protect investors by improving the accuracy and reliability of corporate disclosures, including those related to financial statements and corporate governance.