Diamond Camera Shop Receives Lenses from Excel Optical, Inc

question 4

Multiple Choice

Diamond Camera Shop receives lenses from Excel Optical, Inc., under a sale or return agreement. While the lenses are in Diamond's possession, title is held by

• A) Diamond and Excel jointly.
• B) Diamond only.
• C) Diamond's creditors only.
• D) Excel only.

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Definitions:

FA/Sales Ratio

The Fixed Asset to Sales Ratio compares a company's total amount of fixed assets to its sales revenue, indicating how efficiently the company uses its fixed assets to generate sales.

Financial Forecast

A prediction of future revenues, expenses, and profits for a specific period.

Fixed Assets

Long-term tangible assets that are used in the operations of a business and are not expected to be consumed or converted into cash within a year.

Default Risk

The risk that a borrower will not pay the interest and/or principal on a loan as it becomes due. If the issuer defaults, investors receive less than the promised return on the bond. Default risk is influenced by both the financial strength of the issuer and the terms of the bond contract, especially whether collateral has been pledged.