When the Conditions for Revenue Recognition Are Satisfied,on Which Basis

question 19

Multiple Choice

When the conditions for revenue recognition are satisfied,on which basis should interest be recognized?

• A) Proportionately to the length of the period during which the asset was actually made available and on the basis of the agreed interest rate.
• B) Proportionately to the length of the period during which the asset was actually made available and on the basis of the inflation rate.
• C) Proportionately to the cash collected and on the basis of the agreed interest rate.
• D) None of these

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Definitions:

Internal Growth Rate

The maximum rate at which a company can expand its operations using only internally generated revenues, without resorting to external financing.

Plowback Ratio

The proportion of earnings retained by a company after dividends are paid, usually to fund growth or pay down debt.

Debt-Equity Ratio

A measure used to evaluate a company's financial leverage, calculated by dividing its total liabilities by its shareholders' equity.

Financial Plan

A comprehensive evaluation of an individual's or organization's current and future financial state by using known variables to predict future cash flows, asset values, and withdrawal plans.