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:

Economic Profits

Profits calculated after subtracting both the explicit and implicit costs from total revenues; also known as supernormal profits.

Economic Profits

The difference between total revenue and total costs, including both explicit and implicit costs, representing additional earnings beyond the normal profit level.

Industry Entry

The process of a new competitor or company beginning operations in a particular market.

Economic Profit

Economic profit is the surplus obtained after subtracting both the explicit and implicit costs from total revenues, emphasizing the opportunity costs of resources used.