An Expense Resulting from Failing to Take Advantage of Cash

question 257

Multiple Choice

An expense resulting from failing to take advantage of cash discounts when using the net method of recording purchases is called:

• A) Trade discounts.
• B) Discounts earned.
• C) Purchases discounts.
• D) Discounts lost.
• E) Sales discounts.

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Definitions:

Times Interest Earned Ratio

A financial metric assessing a company's ability to meet its debt obligations, calculated as earnings before interest and taxes divided by interest expense.

Acid-test Ratio

A liquidity ratio that measures a company’s ability to pay off its current liabilities with quick assets, excluding inventory.

Accounts Receivable Turnover

A financial ratio that measures the efficiency of a company in collecting its receivables or the credit it has extended to customers.

Inventory Turnover

A ratio indicating how many times a company's inventory is sold and replaced over a specific period.