Where the Drawer and Acceptor Are Both Members of the Same

question 28

Multiple Choice

Where the drawer and acceptor are both members of the same group, which of the following statements is true:

• A)Bills held to maturity appear in group data as both a receivable and payable and are eliminated just like any other intra-group debt
• B)Bills discounted without recourse cease to be intra-group debts and ought not to be eliminated
• C)Bills discounted with recourse give rise to a contingent liability which should be eliminated
• D)All of the above

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Definitions:

Current Ratio

A liquidity ratio; current assets are divided by current liabilities to indicate a company’s ability to pay its short-term debt. This ratio does not provide as much certainty as the acid test ratio.

Current Assets

Assets that can be converted into cash or used within one year or the normal operating cycle of the business, whichever is longer.

Common-Size Statements

Financial statements that are expressed as a percentage of a certain figure, allowing for easier comparison across time periods and companies by standardizing the data.

Percentage Of Change

A mathematical calculation used to determine the percentage increase or decrease of a value over a period of time.