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 that sells on terms of net 30 changes its policy and begins offering all customers terms of 2/10, net 30 days, 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 days, and its DSO is 30 days, then its aging schedule would probably show some past due accounts.
D) Statements a and c are correct.
E) None of the statements above is correct.

Question

Quizplus · Accepted Answer

Statement A is incorrect because a higher DSO typically indicates that a firm's customers are taking longer to pay their bills, which is not desirable from a credit management perspective. 
Statement B is also incorrect as offering customers a discount for early payment generally leads to a decrease in DSO. 
Statement C is the most correct as a DSO of 30 days indicates that on average, customers are taking advantage of the full 30 days before paying. This suggests that some customers may be past due on their payments.

Which of the Following Statements Is Most Correct