Suppose a Firm Has Net Income of $8 on Sales

question 12

Multiple Choice

Suppose a firm has net income of $8 on sales of $40,fixed assets of $75,and total assets of $90.The firm retains 50% of its earnings.If the firm is operating at 80% capacity,what are the full capacity sales?

• A)$40
• B)$48
• C)$50
• D)$72

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Definitions:

Current Liabilities

Current liabilities are a company's debts or obligations that are due to be paid to creditors within one year.

Temporary Investments

Securities or assets that a company intends to sell within a short period, typically one year, to generate income.

Net Receivables

The amount of money expected to be received from all outstanding accounts receivable after deducting allowances for doubtful accounts.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.