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Multiple Choice
Which of the following types of receivables is most likely to appear on a company's credit report?
A
Interest Receivable
B
Dividends Receivable
C
Notes Receivable
D
Accounts Receivable
Verified step by step guidance
1
Understand the concept of receivables: Receivables are amounts owed to a company by its customers or other parties. They are considered assets and are recorded on the balance sheet. Common types include Accounts Receivable, Notes Receivable, Interest Receivable, and Dividends Receivable.
Focus on Accounts Receivable: Accounts Receivable represents amounts owed by customers for goods or services provided on credit. It is the most common type of receivable and is directly tied to a company's operations and sales.
Consider the nature of credit reports: A company's credit report typically reflects its ability to collect payments from customers and manage its receivables effectively. Accounts Receivable is the most relevant type of receivable for assessing this aspect of financial health.
Compare other types of receivables: Interest Receivable arises from interest earned but not yet received, Dividends Receivable comes from dividends declared but not yet paid, and Notes Receivable represents formal written promises to pay. These are less likely to appear on a credit report because they are not directly tied to operational sales activities.
Conclude why Accounts Receivable is the correct answer: Since Accounts Receivable is directly related to the company's core business activities and reflects its ability to collect payments, it is the most likely type of receivable to appear on a company's credit report.