On Average, a Firm Sells $2,000,000 in Merchandise a Month

question 76

Multiple Choice

On average, a firm sells $2,000,000 in merchandise a month. It keeps inventory equal to one-half of its monthly sales on hand at all times. If the firm analyzes its accounts using a 365-day year, what is the firm's inventory conversion period?

• A) 365.0 days
• B) 182.5 days
• C) 30.3 days
• D) 15.2 days
• E) 10.5 days

Explain the impact of changes in expected inflation and the market risk premium on required returns.

Apply the principles of portfolio diversification and understand its effect on risk reduction.

Understand the concept of the Security Market Line (SML) and its implications for required returns based on beta.

Analyze the effects of changes in investor risk aversion on the market risk premium and the slope of the SML.

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Definitions:

Consumption

The use of goods and services by households.

MPC

The marginal propensity to consume, which measures the proportion of additional income that a consumer spends on goods and services instead of saving.

Aggregate Demand

The total demand for all goods and services in an economy at different price levels, during a specific time period, including consumption, investment, government spending, and net exports.

Employment Act

A piece of legislation aimed at promoting high employment levels, economic growth, and stable prices within an economy.