Which of the Following Statements Is CORRECT

question 57

Multiple Choice

Which of the following statements is CORRECT?

• A) in managing a firm's accounts receivable, it is possible to increase credit sales per day yet still keep accounts receivable fairly steady, provided the firm can shorten the length of its collection period (its dso) sufficiently.
• B) because of the costs of granting credit, it is not possible for credit sales to be more profitable than cash sales.
• C) since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio must also have a high payables-to-sales ratio.
• D) other things held constant, if a firm can shorten its dso, this will lead to a higher current ratio.
• E) a firm that makes 90% of its sales on credit and 10% for cash is growing at a constant rate of 10% annually. such a firm will be able to keep its accounts receivable at the current level, since the 10% cash sales can be used to finance the 10% growth rate.

Acknowledge the impact of accounting method differences when comparing data across companies.

Understand and calculate financial ratios relevant to liquidity, solvency, and profitability.

Perform horizontal and vertical financial statement analysis.

Calculate and interpret the changes in sales, profitability, and other financial metrics over time.

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Definitions:

Visual-spatial Skills

The ability to understand, reason, and remember the spatial relations among objects or space.

Brain Part

A specific anatomical component of the brain responsible for various functions, such as the cerebrum for thought and action, or the cerebellum for balance and coordination.

Verbal Processing

The cognitive function involved in the understanding and production of spoken and written language.

Split-brain

A condition resulting from the severance of the corpus callosum, leading to disconnection between the brain's two hemispheres.