What Is the Break-Even Probability of Collection for a Firm

question 62

Multiple Choice

What is the break-even probability of collection for a firm that has a 40% profit margin (ignore present value) ?

• A)24%
• B)40%
• C)60%
• D)80% p x .4 - (1 - p) x .6
• )4p - .7 + .6p = 0

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Definitions:

Cash Disbursements

The actual money or cash outflows paid out by a business, typically recorded in a cash disbursement journal.

Merchandise Purchases

The acquisition of goods for sale, usually finished goods, by a retail or wholesale business.

Budgeted Cost

An estimate of the financial cost for items, production, or projects planned in the future.

Raw Material Purchases

The total cost of all raw materials bought by a company for use in production over a specific period.