Which of the Following Situations Is Most Likely to Explain

question 21

Multiple Choice

Which of the following situations is most likely to explain an accounts receivable turnover that is lower than the industry norm?

• A) The company makes less credit sales than industry
• B) The company gives customers less time to pay than its competitors
• C) The company has been selling inferior products to competitors
• D) The company is systematically over-estimating bad debts

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Definitions:

Private Bargaining

The process through which individual parties negotiate terms and conditions exclusively among themselves without the intervention of external regulations.

Efficient Outcome

An optimal allocation of resources that results in the highest possible satisfaction or utility with the least waste or inefficiency.

Externality

A consequence of an industrial or commercial activity which affects other parties without this being reflected in market prices.

Property Rights

Legal rights to use, control, and benefit from a resource.