XYZ Company Has Assets That Are Traditionally 80% of Sales

question 18

Multiple Choice

XYZ Company has assets that are traditionally 80% of sales, and its liabilities traditionally are 30% of sales. Sales for this year are $70,000 and sales for next year are projected to be $120,000 with a profit margin of 6%. No owner payout will be taken. Using the percentage of sales method, XYZ will need

• A) $7,200
• B) $25,000
• C) $17,800
• D) $30,000 of additional financing.
• E) No financing is required.

---

Definitions:

Oral Contracts

Agreements between parties that are made verbally and not memorialized in writing, yet are still legally binding in many cases.

Reformation

A court-ordered correction of a written contract so that it reflects the true intentions of the parties.

Erroneous Legal Description

A mistake or inaccuracy in the written account of the boundaries or details of a property in legal documents.

Sale of Land

The transfer of ownership of a parcel of real estate from one party to another, typically through a legal process.