Which statement best describes DSO and aging?
A)If a firm's volume of credit sales declines, then its DSO must also decline.
B)If a firm changes its credit terms from 1/20, net 40, to 2/10, net 60, the impact on sales can't be determined because the increase in the discount is offset by the longer net terms, which tends to reduce sales.
C)The DSO of a firm with seasonal sales can vary. While the sales per day calculation is usually based on the total annual sales, the accounts receivable balance will be high or low depending on the season.
D)An aging schedule is used to determine what portion of customers pay cash and what portion buy on credit.

Question

Quizplus · Accepted Answer

Seasonal sales can impact a firm's DSO and result in a higher or lower accounts receivable balance depending on the time of year. This can lead to fluctuations in the DSO metric. The other statements are incorrect or do not accurately describe the relationship between DSO and aging.

Which Statement Best Describes DSO and Aging