Which of the following is true? O If a firm's volume of credit sales decreases, then its liquidity ratios will also decrease. O High assets turnover is being refiected by inefficiencies present in the management of inventory Relatively more restrictive credit term as comparing to other firms within the same industry will have a potential increase in sales If the payment term of n/20 shifted to 5/10, n/20 to start offering customers a cash discount, assuming sales remain to be constant, the day sales outstanding of the firm will likely shorten

Which of the following is true? O If a firm's volume of credit sales decreases, then its liquidity ratios will also decrease. O High assets turnover is being refiected by inefficiencies present in the management of inventory Relatively more restrictive credit term as comparing to other firms within the same industry will have a potential increase in sales If the payment term of n/20 shifted to 5/10, n/20 to start offering customers a cash discount, assuming sales remain to be constant, the day sales outstanding of the firm will likely shorten

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 11MC: Which of the following best represents a positive product of a lower number of days sales in...

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Bulldogs inc. will least likely experience which of the following if the firm shifts its credit terms from n/25 to 3/10, n/25 the computed days sales outstanding will decrease the percentage of credit sales from the total sales revenue will increase decrease in short-term borrowings cash conversion cycle will tend to increase The company’s usage of the Baumol model in cash management involves trade-off. A decrease in the optimal transaction size would more likely result from Decrease of debt to asset ratio Increase of return on marketable securities None of the choices is correct Increase in the annual demand for cash
Bulldogs inc. will least likely experience which of the following if the firm shifts its credit terms from n/25 to 3/10, n/25 a. the computed days sales outstanding will decrease b. the percentage of credit sales from the total sales revenue will increase c. cash conversion cycle will tend to increase d. decrease in short-term borrowings
Making changes to a firm’s credit policy involves trade-offs. Assuming that all other factors remain constant, which of the following are outcomes expected to result from an increase in a firm’s cash discount? Check all that apply. An increase in the cost of the discounts given An increase in the firm’s bad-debt expenses An increase in the firm’s credit sales, a speeding up of customer payments, and a reduction in the firm’s receivables investment An increase in the creditworthiness of the firm’s customers
Cash Conversion Cycle. Will each of the followingevents increase or decrease cash conversion cycles?(LO2)A-Higher financing rates induce the firm to reduceits level of inventory. b.The firm obtains a new line of credit that enablesit to avoid stretching payables to its suppliers.c-The firm factors its trade receivables.d-A recession occurs andthe firm's customersincreasingly stretch their payables.e.The new production process shortens the timeneeded to manufacture products.
Which of the following statements is most correct? Select one: A. A company with a current ratio of 0.5, should purchase additional inventory on credit if it wants to improve this ratio. B. Return on assets is a function of two variables, the profit margin and current asset turnover. C. A company with a current ratio of 0. 5, should sell some of the existing inventory at cost if it wants to improve this ratio. D. Firms with low rates of return on stockholders’ equity tend to sell at relatively high ratios of market price to book value.
Statement I - Relaxation of Credit Standard increases the Investment in Accounts receivableStatement II - Restriction of credit standard may decrease the chance of incurring bad debts that ultimately affects the profit positively a. False; True b. True; False c. False; False d. True; True Which of the following statements is most correct? a. Other things held constant, the higher a firm’s days sales outstanding (DSO), the better its credit department. b. 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. c. If a firm that sells on terms of net 30 changes its policy and begins offering all customers terms of 2/10, net 30, and if no change in sales volume occurs, then the firm’s DSO will probably increase.
Which of the following statements is true? O As a general rule, management would want to reduce the firm's average collection period. O As a general rule, a firm is not financially affected by the amount of time required to collect its accounts receivable. O As a general rule, management would want to increase the firm's average collection period. O As a general rule, management would want to reduce the firm's accounts receivable turnover ratio.
TRUE OR FALSE 1. Short-term financial policies that are flexible with regard to current assets includes keeping large balance of short-term debt. 2. Costs that fall with increases in the level of investment in current assets are called shortage costs. 3. The firm further increases the effective interest rate earned by the bank on the committed line of credit.
In the case of decrease the operating cash cycle, which one of the following actions should be taken? A Delay payments to suppliers B Increase the inventory level while maintaining constant salesC Increase the period of time for which credit is granted to customers D Decrease the rate at which the average inventory is sold
answer these question in just two sentences. a..“If a firm sold some inventory on credit, its current ratio would probably not change much, but its quick ratio would increase.” If it is possible give reason in two sentences. b. In general, it's better to have a low inventory turnover ratio than a high one, as a low ratio indicates that the firm has an adequate stock of inventory relative to sales and thus will not lose sales as a result of running out of stock. If it is false give reason in two sentences. c. “It is appropriate to use the fixed assets turnover ratio to appraise firms' effectiveness in managing their fixed assets if and only if all the firms being compared have the same proportion of fixed assets to total assets.” If you are not agreed with this statement give justification in two sentences.
Calculating the margin of safety (MOS) measure will help a firm answer which of the following questions? How much will operating profit (πB) change if sales change? Are we using our debt wisely? Will we break even? How much revenue can we lose before we drop below the breakeven point? How much operating profit (πB) will we earn?
Questions: Does a low return on sales indicate a weak company? (Y/N). Explain your answer. Do greater Net sales always result in greater net income? (Y/N) Why? Examine the financial information above and comment on the item that you find interesting.