Which of the Following Statements Is CORRECT

question 129

Multiple Choice

Which of the following statements is CORRECT?

• A) Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be an aggressive strategy because of the inherent risks associated with using short-term financing.
• B) If a company follows a policy of "matching maturities," this means that it matches its use of common stock with its use of long-term debt as opposed to short-term debt.
• C) Net working capital is defined as current assets minus the sum of payables and accruals, and any decrease in the current ratio automatically indicates that net working capital has decreased.
• D) If a company follows a policy of "matching maturities," this means that it matches its use of short-term debt with its use of long-term debt.
• E) Net working capital is defined as current assets minus the sum of payables and accruals, and any increase in the current ratio automatically indicates that net working capital has increased.

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Definitions:

Perpetual Inventory

A method of accounting for inventory that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Subsidiary Ledgers

Detailed ledgers that contain information supporting entries recorded in a general ledger, such as accounts receivable or accounts payable details.

Job Order Costing

An accounting methodology used for assigning manufacturing costs to an individual product or batches of products, typically when each product's construction is sufficiently unique.

Process Cost Accounting

A method of accounting used for goods produced continuously, assigning costs to units of output.