Which of the Following Statements Is Correct

question 168

Multiple Choice

Which of the following statements is correct?

• A) Other things held constant,the higher a firm's days sales outstanding (DSO),the better its credit department.
• B) A firm will relax its credit standards only if it expects bad debts will not increase because of the change.
• C) If a firm which sells on terms of "net 30" changes its policy and begins offering all customers terms of "2/10,net 30," and if no change in sales volume occurs,then the firm's DSO will probably increase.
• D) If a firm sells on terms of 2/10,net 30,and its DSO is 30 days,then its aging schedule would probably show some past due accounts.
• E) Statements a,b,c,and d are all false.

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Definitions:

Direct Materials Costs

Costs that are directly traceable to the production of specific goods or services, such as raw materials used.

Direct Labor Costs

Expenses related to employees who directly contribute to the production of goods or services, such as wages for assembly line workers.

Period Costs

Costs that are expensed in the period they are incurred rather than being capitalized or included in the cost of goods sold, such as selling, general, and administrative expenses.

Selling

The process of promoting and exchanging goods or services for value.