Which of the following is correct with regards to cash discounts offering? Bad debts expense will probably decrease since customers more likely take the advantage of discounts It is used lengthen the cash conversion cycle without putting pressure the clients Investment in accounts receivable will likely grow since more customers will pay on a later date These are granted because customer acquires high quantity of products and goods

Which of the following is correct with regards to cash discounts offering? Bad debts expense will probably decrease since customers more likely take the advantage of discounts It is used lengthen the cash conversion cycle without putting pressure the clients Investment in accounts receivable will likely grow since more customers will pay on a later date These are granted because customer acquires high quantity of products and goods

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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Which of the following is correct with regards to cash discounts offering? a. It is used lengthen the cash conversion cycle without putting pressure the clients b. Investment in accounts receivable will likely grow since more customers will pay on a later date c. Bad debts expense will probably decrease since customers more likely take the advantage of discounts d. These are granted because customer acquires high quantity of products and goods
Which of the following actions is least likely to increase acompany’s accounts receivable turnover?a. Encouraging customers to use bank credit cards, suchas Visa and MasterCard, rather than other nationalcredit cards, such as American Express.b. Offer customers larger cash discounts for making earlypayments.c. Reduce the interest rate charged to credit customers.d. Sell accounts receivable to a factor.
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
When a company has a generous credit policy, cash is tied up in receivables and the company must finance its expansion or the payment of its bills through increased borrowing. What label is given to this cost of selling on credit? Carrying cost Sales returns and allowances cost Bookkeeping cost Bad debit cost
A. What is the incremental cash flows from switching credit policies? B. What is the cost of switching? C. What is your recommendation? D. What is the break-even sales increase? Interpret.
What is the effect of extending the collection period for accounts receivable? The collection cost will be reduced. Cash flows from operations may be higher than expected for the company’s sales. The company should expand operations with its excess cash. Bad debt expense will generally be higher.
Which of the following statements are true regarding sales discounts (i.e., discounts customers receive for paying quickly)? I. Net Income differs between the net and gross methods when customers do not pay within the discount period. II. The net and gross methods do not affect the amount or timing of cash collected. III. Customers have to elect in advance whether they will pay in time to take the discount. Group of answer choices: I only II only III only I and II only II and III only
Which of the following is a positive sign that a company can quickly turn its receivables into cash? a. A low receivables turnover ratio.b. A high receivables turnover ratio.c. A low average collection period.d. Both a high receivables turnover ratio and a low average collection period.
Which of the following is/are a sign that a company can quickly turn its receivables into cash (may have more than one answer)? Check All That Apply a)A high average collection period. b)A low average collection period. c)A low receivables turnover ratio. d)A high receivables turnover ratio.
Which of the following is NOT a reason for sales discounts to be offered to the debtors(customers)? A. Increase the amount paid by the debtors B. Improve the liquidity by turning the accounts receivable into cash C. Encourage earlier settlement of debts by debtors D. Reduce the level of bad debts
Which of the following is/are a sign that a company cannot quickly turn its receivables into cash (may have more than one answer)? Check All That Apply a)A low receivables turnover ratio. b)A low average collection period. c)A high receivables turnover ratio. d)A high average collection period.
Which of the following statements is most correct? a. A cash management system that maximizes collections float while minimizing disbursement float is preferable to one that has lower collections float while increasing disbursement float. b. Other things held constant, a firm will need a smaller line of credit if it can arrange to pay its bills by the 5th of each month than if its bills come due uniformly during the month. c. None of the statements are correct. d. The use of a lockbox is intended to reduce cash theft losses. In the event that if the cost of the lockbox is less than the theft losses avoided, the lockbox should be installed. e. A cash management system that minimizes collections float while increasing disbursement float outperforms one with higher collections float but lower disbursement float.