A Customer Has Ordered Goods Generating a Present Value of $800

question 42

Multiple Choice

A customer has ordered goods generating a present value of $800. The present value of production costs is $600. Under what conditions should you extend credit if there is no possibility of repeat orders?

• A)If the probability of payment exceeds 0.67
• B)If the probability of payment exceeds 0.80
• C)If the probability of payment exceeds 0.75
• D)If the probability of payment exceeds 0.90

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Definitions:

Dividend

A portion of a company's earnings distributed to its shareholders, usually in the form of cash or additional stock.

Partnership Accounting

The process of managing and recording the financial activities, transactions, and interests of partners within a business partnership.

Drawing Account

An account that tracks the money or goods withdrawn from a business by its owners for personal use.

Capital Account

A financial statement that shows the changes in ownership interest of a company over a period.