Which of the Following Statements Is FALSE

question 48

Multiple Choice

Which of the following statements is FALSE?

• A)One factor that contributes to the length of a firm's receivables and payables is the delay between the time a bill is paid and the cash is actually received.
• B)The credit that the firm is extending to its customer is known as trade credit.
• C)Collection float is the amount of time it takes before payments to suppliers actually result in a cash outflow for the firm.
• D)Under the Modigliani-Miller assumptions of perfect capital markets, the amounts of payables and receivables are irrelevant.

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Definitions:

Realization

The process of converting non-cash assets into cash or recognizing revenue when it is earned and measurable, regardless of when cash is received.

Partnership Termination

The process of dissolving the business relationship between partners under the terms of a partnership agreement.

Income-Sharing Ratios

Ratios that determine how profits or losses are divided among business partners or stakeholders according to agreed terms.

Capital Balance

The portion of equity attributable to the owners or shareholders in the company, reflecting the initial and additional contributions plus retained earnings minus withdrawals.