Which Statement About Accounts Receivable Is Correct

question 44

Multiple Choice

Which statement about accounts receivable is correct?

• A)If a security analyst saw that a firm's DSO was higher than the industry average and was increasing and trending still higher, this would be interpreted as a sign of strength.
• B)If a firm increases its sales while holding its accounts receivable constant, then, other things held constant, its DSO will increase.
• C)There is no relationship between the DSO and the ACP. These ratios measure entirely different things.
• D)If a firm increases its sales while holding its accounts receivable constant, then, other things held constant, its days' sales outstanding will decline.

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Definitions:

Collective Bargaining Agreement

A written legal contract between an employer and a union representing the employees, containing terms of employment, working conditions, and wage rates.

Strikes

Work stoppages initiated by employees to protest against policies or conditions of their employers.

U.S. Economy

Refers to the economic system of the United States, characterized by a mixed economy that includes private freedom, combined with centralized economic planning and government regulation.

Labor Unions

Organizations formed by workers in various industries to protect and advance their rights, wages, benefits, and working conditions through collective bargaining.