A Firm's Net Assets Equal 55% of Sales

question 33

Multiple Choice

A firm's net assets equal 55% of sales. The firm expects a sales increase of $78,000 next year with $6,500 of that amount reinvested in the firm. What is the external financing need?

• A) $49,400
• B) $21,200
• C) $28,600
• D)$36,400

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Definitions:

Collection Policy

A set of guidelines that a company follows to manage the collection of accounts receivable or outstanding invoices.

Aging Schedule

A methodical layout of a company's accounts receivable broken down by their due dates, typically used to manage and identify overdue accounts that may become uncollectable.

Credit Cost Curve

A graphical representation of the trade-off between the credit costs against the recovery rate or the likelihood of default.

Credit Period

The time frame between the purchase of goods on credit and the payment for those goods, offered by suppliers to buyers as an incentive.