A Firm Currently Has $2,000,000 in Assets and $1,000,000 in Accounts

question 21

Multiple Choice

A firm currently has $2,000,000 in assets and $1,000,000 in accounts payable.If the firm expects sales to increase by 10% from last year to next year,then what is the estimated external funds required if the firm pays all of its net income to shareholders?

• A) $100,000
• B) $1,000,000
• C) $2,000,000
• D) none of the above

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Definitions:

Obsolescence Factors

Elements that contribute to the decline in value and usefulness of assets over time, affecting their depreciation.

Expected Repairs

Anticipated maintenance or fixing activities for assets, often projected and budgeted for in financial planning.

Units-Of-Activity

A depreciation method where the expense is based on the number of units the asset produces or hours it operates, rather than the passage of time.

Useful Life

The estimated period of time that an asset is expected to be used by an entity, affecting its depreciation calculation.