Assuming That We Can Earn a 10% Return on Accounts

question 28

Multiple Choice

Assuming that we can earn a 10% return on accounts receivable, which of the following strategies to finance an increase in our accounts receivable balance would be optimal?

• A) An increase in bank loans that would cost us 8%
• B) A decrease in inventories that are earning a 16% return
• C) A reduction in marketable securities that are earning a return of 14%
• D) An increase in accounts payable that would cost our firm 15%

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Definitions:

Joules

A unit of energy in the International System of Units (SI), equivalent to the energy transferred to an object when a force of one newton moves it one meter in the direction of its application.

U.S. Standard Measurement

A system of measurement used primarily in the United States, including units such as inches, feet, and pounds.

Heat Energy

The form of energy that is transferred between systems or objects with different temperatures, driving changes in temperature and state of matter.