Which of the Following Statements Is Most Correct

question 16

Multiple Choice

Which of the following statements is most correct?

• A) it is possible for a firm to overstate profits by offering very lenient credit terms which encourage additional sales to financially "weak" firms. a major disadvantage of such a policy is that it is likely to increase uncollectible accounts.
• B) a firm with excess production capacity and relatively low variable costs would not be inclined to extend more liberal credit terms to its customers than a firm with similar costs that is operating close to capacity.
• C) firms use seasonal dating primarily to decrease their dso.
• D) seasonal dating with terms 2/15, net 30 days, with april 1 dating, means that if the original sale took place on february 1st, the customer can take the discount up until march 15th, but must pay the net invoice amount by april 1st.
• E) if credit sales as a percentage of a firm's total sales increases, and the volume of credit sales also increases, then the firm's accounts receivable will automatically increase.

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Definitions:

Horizontal Merger

A horizontal merger is a business consolidation that occurs between firms operating in the same industry or producing similar products, aimed at increasing market share.

Supplier

An entity that provides goods or services to another company, often part of the supply chain or procurement process.

Customer

An individual or entity that purchases goods or services from a business.

Congeneric Mergers

Mergers between companies in the same industry but do not offer the same products or services, aiming to diversify their product lines or extend their market reach.