A Potential Creditor's Judgment About Granting Credit Would Be Most

question 6

Multiple Choice

A potential creditor's judgment about granting credit would be most influenced by the potential customer's:

• A) current ratio at the end of the prior fiscal year.
• B) most recent acid-test ratio.
• C) trend of acid-test ratio over the past three years.
• D)practice with respect to taking cash discounts offered by current suppliers.

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Definitions:

Cost of Goods Sold

The expenses incurred directly from the production of a company's sold products, comprising materials and labor.

Net Income

The income left over after deducting all costs, taxes, and expenses from the total revenue.

Balance Sheet

A financial summary indicating a company's assets, outstanding liabilities, and the total equity of its shareholders at a determined point in time.

Understated

Describes financial statements or figures that are reported as less than their actual values.