All of the Following Conditions Signal That Revenue Recognition May

question 68

Multiple Choice

All of the following conditions signal that revenue recognition may have been recorded too early except:

• A) large and volatile amounts of uncollectible accounts receivable.
• B) a decrease in the number of days accounts receivable are outstanding.
• C) unusually large amounts of returned goods.
• D) excessive warranty expenditures.

---

Definitions:

Source of Cash

Any activity or operation that brings money into a business, contributing to its cash flow.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated by dividing current assets by current liabilities.

Net Working Capital

The difference between a company's current assets and current liabilities, indicating short-term financial health.

Short-term Bank Loan

A loan borrowed from a bank with a repayment period typically less than one year, often used for immediate liquidity needs.