Which of the Following Statements Is True

question 21

Multiple Choice

Which of the following statements is true?

• A)The receivables turnover ratio indicates the average number of times the company completes the selling and collecting cycle during the year.
• B)The days-to-collect measure is 365 divided by the receivables turnover ratio.
• C)The receivables turnover ratio and days-to-collect measure move in opposite directions.
• D)All of the answers are acceptable.

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Definitions:

Gross Profit

Income remaining after the cost of goods sold has been deducted from total sales revenue, before deducting any operating expenses.

Equity Method

An accounting technique used by companies to assess the profits earned by their investments in other companies, recognizing income based on the share owned.

Investment Account

An account that holds securities, cash, and other investments for investors.

Statement of Financial Position

A financial statement that shows the assets, liabilities, and equity of a company at a specific point in time, also known as a balance sheet.