What Is Likely to Be the Source of Accounting Standards

question 4

Multiple Choice

What is likely to be the source of accounting standards in common law countries?

• A) Tax law
• B) Non-government entities such as the FASB
• C) Federal and local legislatures
• D) The International Accounting Standards Board

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Definitions:

Acid-Test Ratio

An economic indicator assessing the capability of a business to fulfill its immediate liabilities using its most liquid assets, without counting inventory.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company collects revenue from its credit customers.

Current Ratio

A measure of a company’s capability to settle short-term debts using its current assets.

Acid-Test Ratio

A stringent indicator of a company's short-term liquidity, calculated by dividing liquid assets by current liabilities, excluding inventory from assets.