Suppose That Sam Industries Has Annual Sales of $2 Million

question 9

Multiple Choice

Suppose that Sam Industries has annual sales of $2 million, cost of goods sold of $950,000, average inventories of $45,000, and average accounts receivable of $90,000. Assuming that all of Sam's sales are on credit, what will be the firm's operating cycle?

• A) 0.85
• B) 16.43
• C) 17.29
• D) 33.72

---

Definitions:

Deferred Gross Profit

Income that is earned but not yet realized, often used in installment sales to represent profit to be recognized in future accounting periods.

Unearned Franchise Fees

Fees received from franchisees that cannot be recognized as revenue until certain obligations are fulfilled by the franchisor, categorized as a liability on the balance sheet.

Notes Receivable

Financial assets representing amounts owed to a company by customers or other entities, typically resulting from sales or loans, that are evidenced by formal agreements.

Franchise Revenue

Income generated from franchising operations, which may include initial franchise fees, ongoing royalties, and other franchise-related income.