Which Statement Best Describes DSO

question 92

Multiple Choice

Which statement best describes DSO?

• A)Other things held constant, the higher a firm's DSO, the better its credit department.
• B)If a firm that sells on terms of net 30 changes its policy to 2/10, net 30, and if no change in sales volume occurs, then the firm's DSO will probably increase.
• C)If a firm sells on terms of 2/10, net 30, and its DSO is 30 days, then its aging schedule would probably show some past due accounts.
• D)DSO indicates the maximum number of days it takes a firm's customers to pay their bills.

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Definitions:

Marginal Revenue

The additional income that is generated by selling one more unit of a product or service.

Market Price

The current price at which a good or service can be bought or sold in a marketplace.

Average Variable Cost

The total variable cost per unit of output, calculated by dividing total variable costs by the quantity of output produced.

Profit Maximization

The method used by a company to establish the price and quantity of production that generates the maximum profit.