Which of the Following Statements Is Incorrect

question 53

Multiple Choice

Which of the following statements is incorrect?

• A)The quicker a company collects money from its customers the greater its liquidity, all else equal.
• B)The more quickly a company turns over its inventory, the greater its liquidity, all else equal.
• C)The lower a company's depreciation the greater its liquidity, all else equal.
• D)The greater a company's profit margin the greater its liquidity, all else equal.

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Definitions:

Equipment

Tangible assets used in the operation of a business, but not intended for resale.

Prepaid Rent Expense

An asset account that represents payments made for rent in advance of the rental period, which will be expensed over time as the rental period occurs.

Assets

Resources owned or controlled by a business, expected to produce future economic benefits.

Expenses

Costs incurred in the process of earning revenue; examples include rent, utilities, and salaries.