Which company shows the advance received from customers

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Problem 1: A company needs cash. Instead of borrowing money from a bank, the company seeks an advance from its customers. In return for receiving money in advance, the company offers a discount to its customers. The company shows the advance received from customers as deferred revenue.

a. This will lower the reported debt/equity ratio compared to the scenario in which the company had borrowed cash from a bank.
b. This will raise the reported debt/equity ratio compared to the scenario in which the company had borrowed cash from a bank.
c. This will not change the reported debt/equity ratio compared to the scenario in which the company had borrowed cash from a bank.
d. Cannot answer based on the information given.

Reference no: EM132976745

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