Which of the Following Statements Is CORRECT

question 2

Multiple Choice

Which of the following statements is CORRECT?

• A) If a security analyst saw that a firm's days' sales outstanding (DSO)was higher than the industry average and trending still higher,this would be interpreted as a sign of strength.
• B) A high average DSO indicates that none of the firm's customers are paying on time.In addition,it makes no sense to evaluate the firm's DSO with the firm's credit terms.
• C) There is no relationship between the days' sales outstanding (DSO)and the average collection period (ACP).These ratios measure entirely different things.
• D) A reduction in accounts receivable would have no effect on the current ratio,but it would lead to an increase in the quick ratio.
• E) If a firm increases its sales while holding its accounts receivable constant,then its days' sales outstanding will decline,other things held constant.

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Definitions:

Proportional Changes

Adjustments or alterations that maintain a consistent relationship or ratio among components or between an individual component and a whole.

Menarche

A girl’s first menstruation.

North American Newborn

An infant born in North America, often referring to the health, social, and environmental aspects specific to this geographic region.

Puberty

A period of rapid physical maturation involving hormonal and bodily changes that take place primarily in early adolescence.