Which One of the Following Is Least Likely to Be

question 32

Multiple Choice

Which one of the following is least likely to be correct for a firm that repeatedly stretches its payables?

• A) The firm may receive more favorable status from suppliers.
• B) The firm may reduce its explicit short-term interest expense.
• C) The cost of forgone discounts may exceed the cost of bank credit.
• D) The firm may be labeled as a credit risk.

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Definitions:

Ledger Account Balances

The current balances in ledger accounts, reflecting all transactions recorded over time.

Liability Account

An account documenting the obligations or debts a company owes to others, which must be settled over time.

Normal Balance

The usual debit or credit balance that an account type is expected to have, which helps in ensuring the correct recording of transactions.

Debit

An accounting entry that results in either an increase in assets or a decrease in liabilities on a company's balance sheet.