In a Market System, If fiRms in an Industry Persistently

question 213

Multiple Choice

In a market system, if firms in an industry persistently earn total revenues that are less than total costs, then that industry will

• A) have some firms go out of business.
• B) attract more resources toward it.
• C) experience entry of new firms.
• D) get government protection from failure.

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Definitions:

Average Collection Period

The average number of days it takes for a business to receive payments from its customers for invoices issued, indicative of the effectiveness of a company's credit and collection policies.

Net Sales

The amount of sales generated by a company after deductions for returns, allowances for damaged or missing goods, and discounts.

Accounts Receivable

Amounts owed to a business by its customers for goods or services that have been delivered but not yet paid for.

Receivables Turnover Ratio

A financial metric that measures how efficiently a company collects cash from credit customers.