The Rule for Converting Credit Sales to Cash Received from Debtors

question 40

Multiple Choice

The rule for converting credit sales to cash received from debtors is:

• A) income +/- debtors at the beginning +/- debtors at the end = cash received.
• B) income + debtors at the beginning - debtors at the end = cash received.
• C) income - debtors at the beginning + debtors at the end = cash received.
• D) none of the above.

---

Definitions:

Estimated Cost

A prediction or approximation of the cost of goods or services, based on current and past information, before the actual expense is known.

Net Present Value

A method used in capital budgeting to determine the profitability of an investment by calculating the sum of its present values of all expected future cash flows.

Present Value Index

A financial metric used to evaluate the present value of future cash flows in relation to the initial investment, also known as the profitability index.

Compound Interest

The method of calculating interest where both the original principal and the accumulated interest from past periods on a loan or deposit are considered.