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.

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.

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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What are some possible negative signals when the product of the accounts receivable turnover ratio is lower (i.e., fewer times)?
Which of the following statements is most correct? JUST EXPLAIN ONE ANSWER WHICH IS INCORRECT. In managing a firm’s accounts receivable it is possible to increase credit sales per day yet still keep accounts receivable fairly steady if the firm can shorten the length of its collection period. Since receivables and payables both result from sales transactions, a firm with a high receivables-to-sales ratio should also have a high payables-to-sales ratio.
If a firm's current ratio and quick ratio have been steadily decreasing, the underlying cause might be traced to their credit manager's relaxed attitude about enforcing prompt payment from customers.
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.
An investor wants to know if a company is manipulating its earnings with the help of allowances for doubtful accounts? What is the best way to do this? A.Look at the level of doubtful accounts as a percentage of sales and percentage of receivables for past years. b.Compare the level of doubtful accounts as a percentage of sales and percentage of receivables with peers in the same industry. c.Analyze the earnings trends without allowances for doubtful allowances and identify earnings pressures if any. d.All of these.
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
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.
As a result of the COVID-19 crisis, company A has decided to sell its receivables to a bank in exchange for cash. What would be the effect of this financial decision on the company's current ratio, quick ratio and cash ratio?
Which of the following demonstrates that a company is managing its receivables well? a.The company has cash to pay its bills. b.The company is cash poor. c.The company is losing interest that could be earned by investing. d.The company has many short term loans with high interest.
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 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.
Which of the following is an example of “cookie jar” accounting? a) A company creates cash reserves in profitable years so the money can be used to offset poor earnings in bad years to give the impression that the company is consistently achieving earnings goals and meeting investor expectations. b)A company intentionally misapplies GAAP and, if caught, argues that the earnings effect is “immaterial” and the error is not worth correcting. c)A company takes a one-time charge against income in order to reduce assets, which results in lower expenses in the future. d) A company recognizes revenues before it is appropriate to do so.