If an Industrial Firm Uses the Units-Of-Output Method for Computing

question 68

True/False

If an industrial firm uses the units-of-output method for computing amortization on its only plant asset, factory machinery, the credit to accumulated amortization from period to period during the life of the firm will vary with sales revenue.

---

Definitions:

Retained Earnings

The portion of net earnings not distributed as dividends to shareholders but instead reinvested in the business or kept as a reserve.

Working Capital

The gap between what a firm owns in the short term (assets) and what it owes (liabilities), revealing its efficiency in operations and financial stability in the near term.

Accounts Receivable Turnover

A financial ratio that measures how many times a business can collect its average accounts receivable during a period, indicating how efficiently it manages credit extended to customers.

Average Sale Period

The average time it takes for a company to complete a sales cycle from the initial contact to the final sale.