Which of the Following Statements Is True About the Days

question 50

Multiple Choice

Which of the following statements is true about the Days' Cash on Hand ratio?

• A) It is not useful in comparing different businesses to one another.
• B) It uses all current assets in the numerator of the ratio.
• C) The only operating expense used in the denominator of the ratio is depreciation expense.
• D) It may be useful in determining whether a business is able to meet its cash commitments.

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Definitions:

Diminishing Returns

A principle stating that if one factor of production is increased while others are held constant, the output per unit of the variable factor will eventually decrease.

ATC

An abbreviation for Average Total Cost, a financial metric calculated by dividing the total cost by the quantity of output produced.

MC

Often referred to as Marginal Cost, it is the increase in total cost that arises from an extra unit of production.

Inputs

Resources used in the production process to produce goods or services.