The Balance Sheet May List Current Assets in Their Order

question 35

Multiple Choice

The balance sheet may list current assets in their order of liquidity. Liquidity refers to:

• A) the entity's operating cycle.
• B) how many buyers there are for the asset.
• C) whether the asset is held as security over a liability.
• D) the average length of time it takes to convert an asset into cash.

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Definitions:

Sunk Cost

Costs that have already been incurred and cannot be recovered or altered, and should not affect future business decisions.

Relevant Cost

Costs that will be affected by a decision in the future and therefore should be considered in decision-making processes.

Sell or Process Further

A decision-making process used in managerial accounting to determine whether it is more profitable to sell a product as is or process it further.

Incremental Revenue

The additional revenue generated from a new business action or decision, beyond the existing revenue stream.