Extending Payment Beyond the Due Date in Order to Reduce

question 48

Multiple Choice

Extending payment beyond the due date in order to reduce the cash conversion cycle

• A) is an accepted "stretching" of credit terms.
• B) is an unethical cash management practice.
• C) is an unethical cash management practice, but can be viewed as acceptable.
• D) is backwards; this actually increases the cash conversion cycle.

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Definitions:

Allowance Account

An accounting practice used to create a buffer for potential future losses on receivables, also known as a provision for doubtful debts.

Gross Realizable Value

The estimated selling price of goods minus any costs associated with the completion and sale of those goods.

Promissory Note

A financial instrument where the writer promises to pay a specific sum to a specified person or bearer at a determined date.

Accounts Receivable-Rey Company

This term is not standard; however, "Accounts Receivable" typically refers to the money owed to a company by its customers for goods or services delivered but not yet paid for.