22. W hy would a company sell receivables to another company? a. To improve the quality of its credit granting process. To limit its legal liability To accelerate access to amounts collected. b. c. d. To comply with customer agreements. 23. What is "recourse" as it relates to selling receivables? a. The obligation of the seller of the receivables to pay the purchaser in case the debtor fails to pay b. The obligation of the purchaser of the receivables to pay the seller in case the debtor fails to pay The obligation of the seller of the receivables to pay the purchaser in case the debtor c. returns the product related to the sale. d The obligation of the purchaser of the receivables to pay the seller if all of the receivables are collected. of the following is true when accounts receivable are factored without recourse? transaction may be accounted for either as a secured borrowing or as a sale, 24. Which depending upon the substance of the transaction The receivables are used as collateral for a promissory note issued to the factor by the owner of the receivables. c. The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables d. The financing cost (interest expense) should be recognized ratably over the collection period of the receivables. The balance sheet is useful for analyzing all of the following except a. liquidity b. solvency c.) profitability d. financial flexibility. 25. 26. The net assets of a business are equal to a. current assets minus current liabilities. b. total assets plus total liabilities. c. total assets minus total stockholders' equity d. total assets minus total liabilities 27. The correct order to present current assets is a. cash, accounts receivable, prepaid items, inventories. b. cash, accounts receivable, inventories, prepaid items. c. cash, inventories, accounts receivable, prepaid items. d. cash, inventories, prepaid items, accounts receivable. 28. The basis for classifying assets as current or noncurrent is conversion to cash within a. the accounting cycle or one year, whichever is shorter b. the operating cycle or one year, whichever is longer c. the accounting cycle or one year, whichever is longer d. the operating cycle or one year, whichever is shorter