Which of the Following Assumptions Is Made When Declaring That

question 26

Multiple Choice

Which of the following assumptions is made when declaring that the break-even probability of collection is lower for customers with repeat orders?

• A) The discount rate is fairly high.
• B) The cost of the item will continually decline.
• C) The sales price of the item will continually increase.
• D) Payment on the first order ensures payments on subsequent orders.

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Definitions:

Gross Method

An accounting method for recording purchases at the full invoice price without deducting any cash discounts.

Credit Terms

Conditions under which credit is extended by a lender to a borrower, including repayment schedule, interest rate, and due dates.

Gross Profit

The financial gain obtained by subtracting the cost of goods sold from the revenue generated from sales, excluding operating expenses.

Sales Discounts

Reductions in the price of goods or services offered by a seller to a buyer to encourage prompt payment.