Which of the Following Statements Incorrectly Describes the Accounts Payable

question 31

Multiple Choice

Which of the following statements incorrectly describes the accounts payable turnover ratio?

• A)A high ratio indicates that suppliers are being paid in a timely manner.
• B)The ratio increases when inventory is sold on account regardless of the sales price.
• C)The ratio can be manipulated by aggressively paying off accounts payable at year-end.
• D)The ratio is not affected by the choice of inventory accounting methods.

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Definitions:

Treasury Stock

Treasury Stock represents shares that were issued and subsequently repurchased by the company, reducing the amount of outstanding stock on the open market.

Common Stock

A type of security that represents ownership in a corporation, granting holders voting rights and a share in the company’s profits via dividends.

Treasury Shares

Shares that were once part of the circulating supply of stock but were subsequently reacquired by the issuing company, reducing the amount of outstanding stock on the open market.

Financing Activities

Processes that involve the flow of cash between a company and its owners and creditors, affecting the equity and debt of the business.