If the Average Trade Receivables That a Firm Holds Decreases

question 71

Multiple Choice

If the average trade receivables that a firm holds decreases without any decrease in credit sales,the operating cycle will:

• A)stay the same because of no sales change.
• B)stay the same because cash collections are sooner,and it will affect the cash cycle only.
• C)decreases because days sales outstanding decreases.
• D)stay the same because trade receivables are not in the operating cycle.
• E)have an unknown effect.

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Definitions:

Discount on Bonds Payable

The difference between the face value of a bond and the price for which it sells when the bond's market value is lower than its face value.

Installment Note

A debt instrument that requires regular payments, or installments, of principal and interest over a set period, until the debt is fully repaid.

Journal Entry

A record in accounting that shows a business transaction and its effect on the accounts, typically involving a debit and credit.

Interest Expense

The cost incurred by an entity for borrowed funds, referring to the interest payments made on any form of debt for a specific period.