Reef Corphas Revenues of $500,000 Resulting in an Operating Income of of $54,000.Invested

question 26

Multiple Choice

Reef Corp.has revenues of $500,000 resulting in an operating income of $54,000.Invested assets total $600,000,and the cost of capital is 6%.Calculate the increase in residual income if sales increase by 10% and the profit margin and invested assets remain the same.

• A)$5,400
• B)$24,000
• C)$0
• D)$7,500

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Definitions:

Sales Price

The amount of money that a buyer pays to purchase a product or service.

Net Proceeds

Net Proceeds refer to the amount of money received from a sale or transaction after all fees, expenses, and costs have been deducted.

Operating Cycle

The period from the acquisition of inventory to the collection of cash from receivables, reflecting a company's efficiency in managing its working capital.

Readily Marketable

Assets or securities that can be easily sold or converted into cash, typically without significant loss of value.