A Firm Has Just Ended Its Calendar Year Making a Sale

question 132

Multiple Choice

A firm has just ended its calendar year making a sale in the amount of $200,000 of merchandise purchased during the year at a total cost of $150,500. Although the firm paid in full for the merchandise during the year, it has yet to collect at year end from the customer. The possible problem this firm may face is

• A) inability to receive credit.
• B) high leverage.
• C) low profitability.
• D) lack of cash flow.

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Definitions:

Survey

A drawing of the boundaries of a property prepared by a professional surveyor.

Encumbrances

Legal claims or liabilities attached to property that can affect its use, value, or transferability, such as mortgages or liens.

Discharging

The act of releasing someone from an obligation, such as a debt, duty, or legal liability, often through the payment or fulfillment of what is owed.