Compaq's Accounts Receivable Turnover Rate Was 5

question 49

Multiple Choice

Compaq's accounts receivable turnover rate was 5.7 for this year and 5.4 for last year. Dell's turnover rate was 6.8 for this year and 7 for last year. This means that

• A) Dell has the better turnover rate for both years.
• B) Compaq has the better turnover rate for both years.
• C) Dell's turnover rate is improving.
• D) Compaq's turnover rate is improving.
• E) Dell has the better turnover rate for both years and Compaq's turnover rate is improving.

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Definitions:

Entity Method

An accounting approach where investments in subsidiaries are recorded at cost or in accordance with specific accounting standards, without consolidating the financial statements of the parent and subsidiary.

Carrying Value

The book value of assets and liabilities as recorded on the balance sheet, calculated as the original cost less any depreciation, amortization, or impairment costs.

Fair Value

An estimate of the market value of an asset or liability based on the current market prices or valuations of similar transactions.

Parent-Company Extension Method

An accounting technique where a parent company extends its financial statements to include the financial activities of its subsidiary as if they were its own.