State University, a Very Large Public University, Has a Policy

question 54

Multiple Choice

State University, a very large public university, has a policy of granting faculty members a one-year sabbatical leave after a period of seven years of continuous employment.The leave is to be used for further study, research, or service.During the fiscal year ended 6/30/11, the university paid $3 million to faculty members on sabbatical leave and estimated that faculty members currently not on sabbatical leave earned $3.5 million toward sabbatical leaves they are likely to take in the future.The amount of sabbatical expenditures for the year ended 6/30/11 should be

• A)$0 million.
• B)$3 million.
• C)$3.5 million.
• D)$6.5 million.

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Definitions:

Debt Financing

Involves borrowing funds from external sources to finance business operations or expand capital, typically through loans or issuing bonds.

Equity Financing

Equity financing is the process of raising capital through the sale of shares in an entity, giving investors ownership interests in the company.

Average Collection Period

The average number of days it takes for a company to collect its accounts receivable after a sale has been made.

Credit Terms

Conditions under which credit will be extended to a borrower, including repayment terms, interest rates, and due dates.