Which of the following statements is FALSE?
A)After a firm decides on its credit standards, it must next establish its credit terms.
B)An ageing schedule categorises accounts by the number of days they have been on the firm's books.
C)The decision of how much credit risk to assume plays a large role in determining how much money a firm ties up in its payables.
D)Knowledge of the payments pattern is also useful for forecasting the firm's working capital requirements.

Question

Quizplus · Accepted Answer

The statement in C is false because it incorrectly refers to credit risk affecting money tied up in payables, whereas credit risk actually influences receivables. The decision on credit risk affects how much money a firm ties up in its receivables, not its payables. Payables relate to the firm's obligations to its suppliers, while receivables concern the credit the firm extends to its customers.

Which of the Following Statements Is FALSE