Which of the following statements is CORRECT?
A) Other things held constant, the higher a firm's days sales outstanding (DSO), the better its credit department.
B) If a firm that sells on terms of net 30 changes its policy to 2/10 net 30, and if no change in sales volume occurs, then the firm's DSO will probably increase.
C) If a firm sells on terms of 2/10 net 30, and its DSO is 30 days, then the firm probably has some past-due accounts.
D) If a firm sells on terms of net 60, and if its sales are highly seasonal, with a sharp peak in December, then its DSO as it is typically calculated (with sales per day = Sales for past 12 months/365) would probably be lower in January than in July.

Question

Quizplus · Accepted Answer

DC) If a firm's terms are 2/10 net 30 and its DSO is 30 days, it indicates that customers are taking the full 30 days to pay, suggesting some may be past due, as the discount for early payment is not being utilized.D) With highly seasonal sales peaking in December, the sales per day calculation for DSO in January would reflect the high December sales, leading to a lower DSO compared to July when the sales peak is further in the past.

Which of the Following Statements Is CORRECT