Which of the following statements is CORRECT? a. Other things being equal, if a company can reduce its DSO, it will have a higher current ratio. b. Because receivables and payables are both generated by sales transactions, a company with a high receivables-to-sales ratio also has a high payables-to-sales ratio. c. Because of the costs of granting credit, it is not possible for credit sales to be more profitable than cash sales. d. In managing a firm's accounts receivable, it is possible to increase credit sales per day while keeping accounts receivable relatively stable, provided the firm can sufficiently shorten its collection period (its DSO). e. A company that makes 90% of its sales on credit and 10% in cash grows at a consistent rate of 10% each year. Since the 10% cash sales can be used to fund the 10% growth rate, such a company can hold its accounts receivable at the same level.
Which of the following statements is CORRECT?
a. Other things being equal, if a company can reduce its DSO, it will have a higher current ratio.
b. Because receivables and payables are both generated by sales transactions, a company with a high receivables-to-sales ratio also has a high payables-to-sales ratio.
c. Because of the costs of granting credit, it is not possible for credit sales to be more profitable than cash sales.
d. In managing a firm's accounts receivable, it is possible to increase credit sales per day while keeping accounts receivable relatively stable, provided the firm can sufficiently shorten its collection period (its DSO).
e. A company that makes 90% of its sales on credit and 10% in cash grows at a consistent rate of 10% each year. Since the 10% cash sales can be used to fund the 10% growth rate, such a company can hold its accounts receivable at the same level.
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