If a Company Attempts to Artificially Inflate Current Sales and Net

question 33

Multiple Choice

If a company attempts to artificially inflate current sales and net income by shipping goods that have not been ordered,we would expect that the receivables turnover ratio will:

• A)rise and the days-to-collect will rise,all other things equal.
• B)rise and the days-to-collect will fall,all other things equal.
• C)fall and the days-to-collect will fall,all other things equal.
• D)fall and the days-to-collect will rise,all other things equal.

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Definitions:

Financial Statements

Structured reports that detail the financial performance of an organization, typically including the balance sheet, income statement, and cash flow statement.

Depreciation Expenses

The allocation of the cost of tangible assets over their useful lives, recognized as an expense on the income statement.

Retained Earnings

Profits that a company chooses not to distribute as dividends to shareholders but instead reinvests in the business or keeps as reserve.

Depreciation

A technique for distributing the expense of a physical asset across its lifespan.