Assuming That We Can Earn a 13

question 91

Multiple Choice

Assuming that we can earn a 13.5% return on accounts receivable,which of the following actions to finance an increase in our accounts receivable balance would be optimal?

• A) a reduction in marketable securities that are earning a return of 12.2%
• B) a decrease in inventories that are earning a 17.6% return
• C) an increase in bank loans that would cost us 14.5%
• D) an increase in accounts payable that would cost our firm 15%

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Definitions:

Monopolistically Competitive

An economic scenario in which numerous companies offer products that are alike but not exactly the same, facilitating rivalry through distinctions in their products.

Excess Capacity

A situation in which a firm or industry has more resources available, particularly production capabilities, than is being utilized due to insufficient demand.

Monopolistic Competition

A market structure characterized by many sellers selling products that are similar but not identical, allowing for limited control over market prices.

Excess Capacity

A situation where a company can produce more goods or services than currently demanded, often leading to inefficiencies and lowered prices.