Management Can Take Deliberate Steps to Produce a Financial Statement

Multiple Choice

Management can take deliberate steps to produce a financial statement that presents a better current ratio at the balance sheet date than the average, or normal, current ratio during the rest of the year. Analysts refer to such actions as window dressing:

A) near the end of its accounting period a firm might delay normal purchases on account.
B) hasten the collections of a loan receivable, classified as noncurrent assets, and use the proceeds to reduce current liabilities.
C) near the end of its accounting period a firm might accelerate normal purchases on account.
D) hasten the collections of a loan receivable, classified as current assets, and use the proceeds to reduce long-term liabilities.
E) choices a and b.