Which One of the Following Statements Is Most Likely Correct

question 16

Multiple Choice

Which one of the following statements is most likely correct for a firm with an average collection period of 90 days?

• A) Its average daily sales are low.
• B) Its average daily sales are high.
• C) Its current ratio will be high.
• D) It is providing financing for approximately 25% of its annual sales.

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Definitions:

Marginal Cost

The cost increase from producing a further unit of a product or service.

Long-Run Equilibrium

Long-run equilibrium occurs in a market when all firms earn normal profits, and no new firms have an incentive to enter or exit, resulting in market stability over time.

Average Total Cost

The cost of producing each unit, calculated by dividing the overall production expenses by the quantity of units manufactured.

Normal Profit

The minimum level of profit needed for a company to remain competitive in the market, factoring in the cost of opportunity.