A $7 Million Deposit Earns 5 Percent for Nine Years

question 136

Multiple Choice

A $7 million deposit earns 5 percent for nine years. If the account loses 2 percent per year after that, how long will it take to be reduced back to $7 million?

• A) 6.78 years
• B) 10.29 years
• C) 11.29 years
• D) 21.74 years

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Definitions:

Accounts Receivable Period

Also known as the average collection period, it refers to the average number of days it takes a company to collect payments from its credit sales.

Collecting Receivables

Collecting receivables involves the process or steps taken by a business to ensure that payments are received from customers for goods or services provided on credit.

Cash Cycle

The period of time between a company's purchase of inventory and the receipt of cash from accounts receivable.

Operating Cycle

The duration of time from the purchase of inventory to the collection of cash from sales, reflecting the efficiency of a company's operations.