Which of the following is a true statement regarding an exit-price accounting system?
A)It measures flexibility of the firm in terms of the amount of cash that would be realized from a forced liquidation of assets.
B)It provides an excellent indicator of liquidity.
C)It provides an estimate of the speed of conversion of a firm's resources.
D)It provides an estimate of the cash conversion value of a firm's resources.

Question

Quizplus · Accepted Answer

An exit-price accounting system provides an estimate of the cash conversion value of a firm's resources, meaning it measures the amount of cash that would be realized if the assets were sold in an orderly manner. Option A is incorrect because it is referring to the firm's solvency, not the accounting system. Option B is also incorrect because liquidity measurement is not a primary function of an exit-price accounting system. Option C is partially correct, as it does provide an estimate of conversion speed, but this is not its primary use.

Which of the Following Is a True Statement Regarding an Exit-Price