Which of the Following Is an Example of a Positive

question 2

Multiple Choice

Which of the following is an example of a positive theory?

• A) Fair value should be used to measure assets in the financial statements, so as to provide more relevant information
• B) Cost should be used to measure assets in the financial statements because it is more reliable and accurate
• C) The conceptual framework for accounting
• D) A theory that explains why managers prefer or choose particular accounting methods or policies over others

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Definitions:

Accounts Receivable Turnover Ratio

A financial metric that measures how efficiently a company collects cash from its credit sales by dividing net credit sales by the average accounts receivable during a period.

Customer Payment Patterns

The tendencies or behaviors observed in how customers make their payments, which can vary in timing and method.

Debt Ratio

The debt ratio is a financial ratio that measures the extent of a company’s leverage, indicated by dividing total liabilities by total assets.

Quick Ratio

A liquidity ratio that measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventories.