Uninformed Dealers Often Price Themselves Out of the Market by

question 25

Multiple Choice

Uninformed dealers often price themselves out of the market by

• A) excessively narrowing the bid-ask spread.
• B) charging excessive commissions.
• C) ignoring the bid-ask spread.
• D) having too wide a bid-ask spread.

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Definitions:

Net Method

The net method accounts for purchase discounts by recording the initial purchase at net of the discount, encouraging prompt payment by recognizing discounts not taken as interest expense.

Periodic Inventory Method

An accounting method that updates inventory levels and cost of goods sold at the end of a financial period rather than after each sale.

Voucher Payment

A method of payment where documentation is used to authorize and record a payment transaction.

Discount Period

The time frame in which a payment made towards a purchase is eligible for a discount, typically to encourage early payments.