Given a Choice,most Companies Would Prefer to Report a Liability

question 55

Multiple Choice

Given a choice,most companies would prefer to report a liability as long-term rather than current because:

• A)It may cause the firm to appear less risky to investors and creditors.
• B)It may reduce interest rates on borrowing.
• C)It may cause the company to appear more stable commanding a higher stock price for new stock listings.
• D)All of the other answers are true.

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Definitions:

Activity-Based Costing

An expense determination technique that identifies organizational activities and attributes the cost of each to all products and services, commensurate with their genuine consumption.

Direct Materials Cost

The cost of raw materials and components that are directly involved in the production of a product, easily traceable to the end product.

Direct Labor Cost

The wages and other expenses for labor directly involved in the manufacture of specific goods or services.

Direct Labor-Hours

All the hours contributed by workers directly participating in creating products.