Xon Company Is Planning to Purchase Fixed Assets at a Cost

question 9

Multiple Choice

Xon Company is planning to purchase fixed assets at a cost of $200,000. The planned delivery date is 1 February 2015. A deposit of $10,000 is to be paid on 1/11/14. The amount that will appear in the cash budget for November 2014 is:

• A) $190,000 outflow.
• B) $10,000 outflow.
• C) $200,000 outflow.
• D) $10,000 inflow.

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Definitions:

Operating Cycle

The average period of time required for a business to make an initial outlay of cash to produce goods or services, sell them, and receive cash back from customers.

Earnings Per Share

A financial metric that measures the amount of net income earned per share of stock, used to gauge a company's profitability.

Debt-To-Equity Ratio

A financial metric that shows the comparative amount of equity from shareholders and borrowed funds used to acquire assets for a company.

Solvency

The ability of an entity to pay its long-term debts and financial obligations as they become due.