QUESTION

4) Which of the following statements is CORRECT? A) Since receivables and payables both result from sales transactions

Category: Business
Subject: Finance
Due Date: 01/27/2016
Question Asked: 2016-01-27 18:15:55

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4) Which of the following statements is CORRECT?

A) Since receivables and payables both result from sales transactions, a firm with a high

receivables-to-sales ratio must also have a high payables-to-sales ratio.

B) Because of the costs of granting credit, it is not possible for credit sales to be more

profitable than cash sales.

C) A firm that makes 90% of its sales on credit and 10% for cash is growing at a constant

rate of 10% annually. Such a firm will be able to keep its accounts receivable at the current level,

since the 10% cash sales can be used to finance the 10% growth rate.

D) Other things held constant, if a firm can shorten its DSO, this will lead to a higher current

ratio.

E) In managing a firm's accounts receivable, it is possible to increase credit sales per day yet

still keep accounts receivable fairly steady, provided the firm can shorten the length of its

collection period (its DSO) sufficiently.

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4) Which of the following statements is CORRECT? A) Since receivables and payables both result from sales transactions

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Posted on 2016-01-27 18:15:55

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...an cash sales.C) A firm that makes 90% of its sales on credit and 10% for cash is growing at a constant rate of 10% annually. Such a firm will be able to keep its accounts receivable at...

The full tutorial is about 166 words long.