How High Can Accounts Receivable Be Allowed to Grow Before

question 107

Multiple Choice

How high can accounts receivable be allowed to grow before the firm's receivables period exceeds 50 days if annual sales equal $5 million and the cash conversion cycle equals 75 days?

• A) $342,466
• B) $684,932
• C) $1,027,397
• D) $1,712,329

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Definitions:

Call Contract

A financial derivative agreement giving the buyer the right, but not the obligation, to buy an underlying asset at a specified price before a specified date.

Break Even

The point at which total cost and total revenue are equal, meaning there is no net loss or gain.

Stock Price

The cost of purchasing a share of a company, fluctuating based on market conditions, company performance, and investor sentiment.

Maximum Loss

The highest possible amount an investment might lose.