Which of the Following Statements Is Correct

question 15

Multiple Choice

Which of the following statements is correct?

• A)If a firm has a very high fixed asset turnover, it means that the firm may be nearing its maximum production capacity.
• B)An extremely low average collection period will maximize net income.
• C)In general, a firm should strive for a high average payment period because it wants to pay for its purchases as quickly as possible.
• D)All of these statements are correct.

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Definitions:

Permanent Accounts

Accounts on the balance sheet that carry over their ending balances into the next financial period, such as assets, liabilities, and equity accounts.

Assets and Liabilities

Essential components of a financial statement, with assets representing what a company owns and liabilities what it owes.

Reversing Entry

An accounting technique that negates the impact of the previous entry, often used to simplify bookkeeping for accruals and deferrals.

Depreciation

The process of allocating the cost of a tangible asset over its useful life to account for the loss of value over time.