Under Accrual Accounting, the Receipt of Cash from a Trade

question 70

Multiple Choice

Under accrual accounting, the receipt of cash from a trade debtor will:

• A)have no impact on profit and increase cash.
• B)increase profit and increase cash.
• C)decrease profit and decrease cash.
• D)none of the above.

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Definitions:

Debt-to-Assets Ratio

A leverage ratio that calculates the total amount of debt relative to the total amount of assets, indicating how much of the company's assets are funded by debt.

Cost of Equity

The rate of return that a company theoretically pays to its equity investors to compensate for the risk they undertake by investing in the company.

Cost of Equity

The return that investors expect for investing in a company's equity, considered the cost of equity capital.

Security Market Line

A representation in financial models that shows the relationship between the risk of an investment and its expected return.