What Approximate Value Should a Firm Put on Being Able

question 141

Multiple Choice

What approximate value should a firm put on being able to permanently reduce the length of its collection period by 1 day if annual sales (all on credit) are $5,000,000 and the appropriate opportunity cost is 10% annually?

• A) $1,370
• B) $15,068
• C) $13,700
• D) $50,000

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Definitions:

Financial Statement

A formal record of the financial activities and position of a business, individual, or other entity, typically including a balance sheet, income statement, and cash flow statement.

BAT Model

A theoretical framework for analyzing the behavior, attitudes, and techniques necessary for effective leadership or managerial performance.

Optimal Cash Position

The Optimal Cash Position is the ideal amount of cash that a company aims to hold for covering immediate transactional needs while minimizing holding costs, ensuring liquidity without forgoing potential higher returns from other investments.

Cash Surpluses

Excess funds that a business possesses after it has paid all expenses and liabilities, which can be used for investment, paying down debt, or other purposes.